Question 4-8

a,b,c

Current ratio Operating return on assets Times interest earned Debt ratio Inventory turnover Days in receivables Total asset turnover Fixed-asset turnover Operating profit margin Return on equity 4-7. (Analyzing operating return on assets) The D. A. Winston Corporation earned an operating profit margin of 1 percent based on sales of $10 million and total assets of $5 million last year. a. What was Winston's total asset turnover ratio? b. During the coming year, the company president has set a goal of attaining a total asset turnover of 3.5. How much must firm sales rise, other things being the same, for the goal to be achieved? (State your answer in both dollars and percentage increase in sales.) c. What was Winston's operating return on assets last year? Assuming the firm's operating profit margin remains ne, what will the operating return on assets be next year if the total asset turnover goal is achieved? 4-8. (Evaluating liquidity) The Tabor Sales Company had a gross profit margin (gross profits - sales ) of 30 percent and sales of $9 million last year. Seventy-five percent of the firm's sales are on credit, and the remainder are cash sales. Tabor's current assets equal $1.5 million; its current liabilities equal $300,000, and it has $100,000 in cash plus marketable securities Page 143 uy Part 1 The Scope and Environment of Financial Management > Chapter 4 Evaluating a Fi Financial Performance > Review Questions a. If Tabor's accounts receivable are $562,500, what is its average collection period? b. If Tabor reduces its days in receivables (average collection period) to 20 days, what will be its new level of accounts receivable? c. Tabor's inventory turnover ratio is 9 times. What is the level of Tabor's inventories? 4-9. (Ratio analysis) The financial statements and industry norms are shown below for Pamplin, Inc.: a. Compute the financial ratios for Pamplin for 2014 and for 2015 to compare both against the industry norms. b. How liquid is the firm? c. Are its managers generating an adequate operating profit on the firm's assets? d. How is the firm financing its assets? e. Are its managers generating a good return on equity