Samtana Inc. is considering the purchase of Samoolo Corp. who are in the same industry. Samloos financial
Question:
Samtana Inc. is considering the purchase of Samoolo Corp. who are in the same industry. Samloo’s financial ratios for the past 3 years along with ratios that represents the industry average are presented below. Pick any 5 of the 9 ratios below and (i) explain the importance of the ratio. (don’t just state the formula for its calculation) (ii) how does Samoolo compare to the industry average.
Year 3 Year 2 Year 1 Industry Average
1 -Return on common shareholders' equity 13.03 13.02 12.98 12.96
2- Average sale period 51.16 47.29 42.15 38.63
3-Times interest earned 3.87 3.46 3.28 3.56
4 -Price-earnings ratio 10.96 11.23 11.39 11.54
5 - Debt-to-equity ratio 0.50 0.46 0.4 0.57
6 - Accounts receivable turnover 6.98 7.25 7.83 7.78
7 - Current ratio 1.65 1.95 1.70 2.30
8 -Dividend yield ratio 2.08 2.06 2 .12 2.25
9 - Inventory Turnover (days) 15.7 18.9 21.2 25.3
Corporate Finance Core Principles and Applications
ISBN: 978-0077905200
3rd edition
Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe, Bradford