Question

Calculating Ratios Portfolio

Answer 1

This problem needs a Balance Sheet. Ratios are computed based on Balance Sheet, Income Statement, and Statement of Cash flows.

I'll just give out the formula needed to solve for each question.

Current ratio = Current Assets / Current Liabilities
* These figures are found in the Balance Sheet.

Quick ratio = (Cash + Marketable Securities + Accounts Receivable) ÷  Current Liabilities
* These figures are found in the Balance Sheet

Inventory turnover ratio = Cost of goods sold / Average Inventory
Inventory turnover ratio = 1,400,000 / Average Inventory

Receivables turnover = Net Credit Sales / Average Accounts Receivable
Assuming Sales is all on account,
Receivables turnover = 2,000,000 / Average Accounts Receivable

Total asset turnover = Net Sales / Total Assets
Assuming Sales is all net of sales returns and discounts, 
Total asset turnover = 2,000,000 / Total Assets

Times interest earned (TIE) = Income before Interest and Taxes / Interest Expense
Times interest earned = 370,000 / 50,000 = 7.4 times

Total debt ratio = Total Liabilities / Total Assets

Return on equity (ROE) = Net Income / Shareholders Equity
Return on equity = 240,000 / Shareholders' Equity 

Return on assets (ROA) = Net Income / Total Assets
Return on assets = 240,000 / Total Assets
 
Market-to-book ratio = Share Price / Net book value per share
Market-to-book ratio = 41.40 / Net book value per share

Price-to-earnings (P/E) ratio = Market Value per share / Earnings per share
Price-to-earnings ration = 41.40 / 2.40 = 17.25