Copyright © 2008, The McGraw-Hill Companies, Inc.
- If you are trying to determine how effectively a company’s management is putting its resources to use, which of the
ratios defi ned in this section would be the most useful to know? - If you are trying to determine whether or not a company’s stock price is high relative to the value of its assets, which of
the ratios defi ned in this section would be the most useful to know? - If you are trying to determine how effective a company is at collecting on its receivables, which of the ratios defi ned in
this section would be the most useful to know? - If you are trying to determine how quickly a company is moving its merchandise, which of the ratios defi ned in this
section would be the most useful to know? - Shender Chemical Corp has assets of $3,875,000 and liabilities of $2,935,025. The company’s current assets are
$2,245,000, of which $1,000,000 is in receivables and $500,000 is in inventory. Current liabilities are $899,975. Last
year, the company’s inventory stood at $650,000.
The company earned a gross profi t of $1,525,075 last year and had operating expenses of $1,115,015, on sales of
$6,350,000. Calculate the company’s
a. gross profi t margin
b. net profi t margin
c. current ratio
d. quick ratio
e. liabilities-to-equity ratio
f. inventory turnover ratio
g. average collection days
h. ROA
i. ROE
E. Additional Exercises- Suppose a company has current assets of $750,000 and a current ratio of 4.25. Inventory and prepaid expenses total
$350,000. What is the quick ratio? - Suppose a company has an ROA of 13.75% and a ROE of 18.53%. The company’s equity is $583,901. What are the
company’s total liabilities?
Exercises 12.3 519