388 CHAPTER 10 Analysis of Financial Statements
TABLE 10-1 MicroDrive Inc.: Summary of Financial Ratios
(Millions of Dollars)
Industry
Ratio Formula for Calculation Calculation Ratio Average Comment
Liquidity
Current 3.2 4.2 Poor
Quick, or acid test 1.2 2.1 Poor
Asset Management
4.9 9.0 Poor
46 days 36 days Poor
3.0 3.0 OK
1.5 1.8
Debt Management
53.2% 40.0% High (risky)
3.2 6.0 Low (risky)
3.0 4.3 Low (risky)
Profitability
3.8% 5.0% Poor
14.2% 17.2% Poor
5.7% 9.0% Poor
12.7% 15.0% Poor
Market Value
Price/earnings (P/E) 10.1 12.5 Low
Price/cash flow 5.4 6.8 Low
Market/book (M/B) 1.3 1.7 Low
$23.00
$17.92
Market price per share
Book value per share
$23.00
$4.27
Price per share
Cash flow per share
$23.00
$2.27
Price per share
Earnings per share
$113.5
$896
Net income available to common stockholders
Common equity
$113.5
$2,000
Net income available to common stockholders
Total assets
$283.8
$2,000
Earnings before interest and taxes (EBIT)
Total assets
$113.5
$3,000
Net income available to common stockholders
Sales
$411.8
$136
EBITDALease payments
InterestPrincipal paymentsLease payments
$283.8
$88
Earnings before interest and taxes (EBIT)
Interest charges
$1,064
$2,000
Total liabilities
Total assets
Somewhat
low
$3,000
$2,000
Sales
Total assets
$3,000
$1,000
Sales
Net fixed assets
$375
$8.219
Receivables
Annual sales/365
$3,000
$615
Sales
Inventories
$385
$310
Current assetsInventories
Current liabilities
$1,000
$310
Current assets
Current liabilities
Inventory turnover
Days sales
outstanding (DSO)
Fixed assets turnover
Total assets turnover
Debt ratio
Times-interest-
earned (TIE)
EBITDA coverage
Profit margin
on sales
Basic earning
power (BEP)
Return on total
assets (ROA)
Return on common
equity (ROE)
384 Analysis of Financial Statements
