Question: a . Why are ratios useful? What three groups use ratio analysis and for what reasons? b . Calculate the projected profit margin, operating profit
a Why are ratios useful? What three groups use ratio analysis and for what reasons? b Calculate the projected profit margin, operating profit margin, basic earning power BEP return on assets ROA and return on equity ROE What can you say aboutthese ratios? c Calculate the projected inventory turnover, days sales outstanding DSO fixed as sets turnover, and total assets turnover. How does Computron's utilization of assetsstack up against that of other firms in its industry?
d Calculate the projected current and quick ratios based on the projected balance sheet and income statement data. What can you say about the company's liquidity position and its trend?
e Calculate the projected debt ratio, debttoequity ratio, liabilitiestoassets ratio, timesinterestearned ratio, and EBITDA coverage ratios. How does Computron compare with the industry with respect to financial leverage? What can you conclude from these ratios?
f Calculate the projected priceearnings ratio and marketbook ratio. Do these ratios indicate that investors are expected to have a high or low opinion of the company?
g Perform a common size analysis and percentage change analysis. What do these analyses tell you about Computron?
h Use the extended DuPont equation to provide a breakdown of Computron's projected return on equity. How does the projection compare with the previous years and with the industry's DuPont equation?
i What are some potential problems and limitations of financial ratio analysis?
j What are some qualitative factors that analysts should consider when evaluating a company's likely future financial performance?
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