Assignment 4: External Financing
TABLE 3-2 MicroDrive Inc.: Summary of Financial Ratios (Millions of Dollars)
|
RATIO |
FORMULA |
CALCULATION |
RATIO |
INDUSTRY AVERAGE |
COMMENT |
|
Liquidity |
Current assetsCurrent liabilities |
$1,000$310 = |
3.2 |
4.2 |
Poor |
|
Quick |
Current assets − InventoriesCurrent liabilities |
$385$310 = |
1.2 |
2.1 |
Poor |
|
Asset Management |
|
|
|
|
|
|
Inventory turnover |
SalesInventories |
$3,000$615 = |
4.9 |
9.0 |
Poor |
|
Days sales outstanding (DSO) |
ReceivablesAnnual sales / 365 |
$375$8.219 = |
45.6 |
36.0 |
Poor |
|
Fixed assets turnover |
SalesNet fixed assets |
$3,000$1,000 = |
3.0 |
3.0 |
OK |
|
Total assets turnover |
SalesTotal assets |
$3,000$2,000 = |
1.5 |
1.8 |
Poor |
|
Debt Management |
|
|
|
|
|
|
Debt ratio |
Total liabilitiesTotal assets |
$1,064$2,000 = |
53.2% |
40.0% |
High (risky) |
|
Times-interest-earned (TIE) |
Earnings before interest and taxes ( EBIT )Interest charges |
$283.8$88 = |
3.2 |
6.0 |
Low (risky) |
|
EBITDA coverage |
EBITDA + Lease pmts .Interest + Principal payments + Lease pmts . |
$411.8$136 = |
3.0 |
4.3 |
Low (risky) |
|
Profitability |
|
|
|
|
|
|
Profit margin on sales |
Net income available to common stockholdersSales |
$113.5$3,000 = |
3.8% |
5.0% |
Poor |
|
Basic earning power (BEP) |
Earnings before interest and taxes ( EBIT )Total assets |
$283.8$2,000 = |
14.2% |
17.2% |
Poor |
|
Return on total assets (ROA) |
Net income available to common stockholdersTotal assets |
$113.5$2,000 = |
5.7% |
9.0% |
Poor |
|
Return on common equity (ROE) |
Net income available to common stockholdersCommon equity |
$113.5$896 = |
12.7% |
15.0% |
Poor |
|
Market Value |
|
|
|
|
|
|
Price/earnings (P/E) |
Price per shareEarnings per share |
$23.00$2.27 = |
10.1 |
12.5 |
Low |
|
Price/cash flow |
Price per shareCash flow per share |
$23.00$4.27 = |
5.4 |
6.8 |
Low |
|
Market/book (M/B) |
Market price per shareBook value per share |
$23.00$17.92 = |
1.3 |
1.7 |
Low |