Christian Debt Recovery

Debt To Equity Ratio By Industry

January 24th, 2010 |

Author: Gavin

Financial Ratios

Question 1:

balance sheet

2008

Assets

Current assets:

Cash and marketable securities

$421

Accounts receivable

1109

Inventory

1,760

Total

3,290

Fixed assets:

Gross plant and equipment

5812

Less: Depreciation

840

Net plant and equipment

4982

Other long-term assets

892

Total

5864

Total assets

$9,154

Liabilities and Equity

Current liabilities:

Accrued wages and taxes

$316

Accounts payable

867

Notes payable

872

Total

2,055

Long-term debt:

3,090

Stockholders’ equity:

Preferred stock (25 million shares)

60

Common stock and paid-in surplus (200 million shares)

637

Retained earnings

3,312

Total

4,009

Total liabilities and equity

$9,154

income statement

Net sales

$4,980

Less: Cost of goods sold

2371

Gross profits

2,609

Less: Depreciation

200

Earnings before interest and taxes (EBIT)

2,409

Less: Interest

315

Earnings before taxes (EBT)

2,094

Less: Taxes

767

Net income

$1,327

Less: Preferred stock dividends

$60

Net income available to common stock holders

1,267

Less: Common stock dividends

395

Addition to retained earnings

$872

Earnings per share (EPS)

$6,335

Dividends per share (DPS)

$1,975

Book value per share (BVPS)

$19,745

Market value (price) per share (MVPS)

$26,850.00

Question 2:

Financial ratios:

The table below summarises the financial ratios calculated:

Garners’ Platoon Mental Health Care, INC.

2008

Industry

Current ratio

1.60097324

2.0times

Quick ratio

0.74452555

1.2times

Cash ratio

0.13624595

0.25times

Inventory turnover ratio

1.34715909

2.50times

Day’s sale’s in inventory

270.940531

146.00days

Average collection period

81.2821285

91.00days

Average payment period

133.469

100.00days

Fixed asset turnover ratio

0.84924966

1.25times

Sales to working capital

2.48751249

4.00times

Total asset turnover ratio

0.54402447

0.50times

Capital intensity ratio

1.83815261

2.00times

Debt ratio

56%

50.00%

Debt-to-equity ratio

0.33755735

1.00times

Equity multiplier

13.133429

2.00times

Times interest earned

7.64761905

7.25times

Cash coverage ratio

8.21

8.00times

Profit margin

27%

18.75%

Basic earnings power ratio

26%

19.90%

ROA

14%

9.38%

ROE

190%

18.75%

Dividend payout ratio

31%

35%

Market-to-book ratio

1.35983793

1.300times

PE ratio

4.23835833

4.100times

Sustainable growth is determined by multiplying return on equity by th retention ration, the retention ratio is determined by the difference between earnings per share and dividends per share by earnings per share. Retention ratio is = 69% and ROE = 190%, this means that sustainable growth =131.03%

Question 3:

DuPont system:

ROE = profit margin X total asset turnover X Equity Multiplier

ROE = 190%

Expenses:

Expenses management is reflected by the profit margin, the firm’s profit margin is 27% while the industry value is 18.75%, and this means that the firm manages its expenses properly.

Debt:

Debt management is reflected by the equity multiplier, the equity multiplier for the firm is 13.13 while the industry value is 2, and this means that the firm finances more using debt. This is also reflected by the debt equity ratio whose value is 0.337 while the industry value is 1.

Assets:

Asset management is reflected by the total asset turnover, the value for the firm is 0.54402447 times while the industry value is 0.50 times, and given that the firm’s value is greater than the industry value then the conclusion is that the firm manages its assets properly. This is also reflected by the ROA where the value is 14% for the firm and 9.38% for the industry.

About the Author

Author is associated with SuperiorPapers.us which is a global Research Papers and Term Papers Writing Company. If you would like help in Research Papers and Term Paper Help you can visit Term Paper Help, Non-Plagiarized Essays and College Essays.

The Capital Structure Paradigm: Evolution of Debt/Equity Choices

$85.00

Beginning with a simple model of the debt/equity impact upon firm value and progressively adding complexity to this model, this book seeks to answer the question, What is the frontier of knowledge with respect to debt/equity alternatives, and could a major paradigm shift affect debt/equity choices?With a view toward providing the reader with a framework for examining debt/equity decisions, this bo…