The following ratios are available for toolmakers Stanley Black & Decker, Inc. and Snap-On Incorporated, and vency,
Question:
Instructions
(a) Which company is more liquid? Explain.
(b) Which company is more solvent? Explain.
(c) Which company is more profitable? Explain.
(d) Which company do investors favour? Is your answer consistent with your findings in (a) to (c)? Explain.
Stanley Black & Decker Snap-On Industry Average Liquidity Current ratio Receivables turnover Inventory turnover 1.8:1 8.7 times 6.7 times 6.1 times 4.8 times 2.6:1 7.4 times 3.9 times Debt to total assets Times interest earned 32.9% 3.2 times 45.7% 6.1 times 22.5% 7.6 times Profitability Return on common shareholders' equity Return on assets Profit margin Asset turnover Gross profit margin Price-earnings ratio Payout ratio Dividend yield 4.4% 2.0% 2.4% 0.8 times 35.1% 58.1 times 101.596 1.8% 13.9% 5.2% 70% 0.7 times 45.7% 19.2 times 38.2% 2.0% 4.9% 26% 3.0% 0.9 times 33.3% 33.9 times 17.4% 1.2%
Step by Step Answer:
a Stanley Black Decker appears to be more liquid Although SnapOns current ratio is higher than Stanl...View the full answer
Financial Accounting Tools for Business Decision Making
ISBN: 978-1118024492
5th Canadian edition
Authors: Paul D. Kimmel, Jerry J. Weygandt, Donald E. Kieso, Barbara Trenholm, Wayne Irvine
Related Video
Inventory turnover is a key metric that helps businesses evaluate the efficiency of their operations. A high turnover ratio is generally considered positive, indicating that the company is effectively selling its inventory and making efficient use of its resources. On the other hand, a low turnover ratio may indicate issues such as overstocking or slow sales and may require further examination to identify and address the underlying causes. Businesses use this ratio to make decisions about inventory levels, production schedules, and pricing strategies. It also helps businesses to identify areas where they may need to make improvements, such as reducing lead times for production or optimizing sales and marketing efforts. Additionally, inventory turnover is used by investors and analysts as a key performance indicator to evaluate the financial health and growth potential of a company.
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