Using the financial statements for The EastTN Company from Problem 23.1A, calculate the following financial ratios for

Question:

Using the financial statements for The EastTN Company from Problem 23.1A, calculate the following financial ratios for 2015 and 2016. Comment on any ratio that merits additional consideration.

1. Current ratio

2. Acid-test ratio

3. Inventory turnover

4. Return on sales

5. Earnings per share of common stock

6. Book value per share of common stock

7. Return on total assets

8. Ratio of stockholders' equity to total equities

9. Rate of return on stockholders' equity

10. Asset turnover

Assume all sales are credit sales.

Part II Selected ratios for other common-size companies in the same industry as The EastTN Company follow. Using these data and the ratios you computed in Part I, write brief comments on areas you feel are strengths, weaknesses, or require further observation for The EastTN Company.

1. Rate of return on stockholders' equity, 45.0 percent

2. Stockholders' equity to total equities, 0.6 to 1 (or 60%)

3. Asset turnover, 2.5 to 1

4. Merchandise inventory turnover, 4.5 times

Analyze:

The EastTN Company experienced a 17.7 percent increase in net income after taxes from 2015 to 2016. What return on sales can be anticipated if net sales and net income after taxes increase by 5 percent in 2017?

Financial Statements
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial...
Financial Ratios
The term is enough to curl one's hair, conjuring up those complex problems we encountered in high school math that left many of us babbling and frustrated. But when it comes to investing, that need not be the case. In fact, there are ratios that,...
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Related Book For  book-img-for-question

College Accounting Chapters 1-30

ISBN: 978-0077862398

14th edition

Authors: John Price, M. David Haddock, Michael Farina

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