Using the information below calculate ROA and ROE for this company for 20X4.
1. Using the information below calculate ROA and ROE for this company for 20X4.
|
Company A |
20X6 |
20X5 |
20X4 |
20X3 |
20X2 |
Ind. Average |
|
Net Profit Margin |
4.5% |
4.7% |
4.7% |
4.8% |
5.0% |
4.7% |
|
Total Asset TO |
5.5 |
5.8 |
5.9 |
6.5 |
7.0 |
6.0 |
|
Fin’l Leverage Ratio |
1.4 |
1.4 |
1.4 |
1.5 |
1.5 |
1.5 |
2. The following two sets of ratios belong to the same company. Comment on the following from a trend perspective as well as what these ratios may indicate. Why would DSR rise while DSI falls?
|
|
20X6 |
20X5 |
20X4 |
20X3 |
20X2 |
Ind. Average |
|
DSR (in days) |
57 |
44 |
33 |
34 |
34 |
36 |
|
|
20X6 |
20X5 |
20X4 |
20X3 |
20X2 |
Ind. Average |
|
DSI (in days) |
30 |
33 |
39 |
38 |
42 |
32 |
|
3. You have the following current ratio information for a company but no industry or competitor information. Identify 3 conclusions (either positive or negative) that you might draw from this limited information regarding this company's liquidity position. |
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
2014 |
2013 |
2012 |
2011 |
2010 |
|
|
|
|
Current ratio |
1.2 |
1.2 |
1.6 |
1.8 |
2.0 |
4. General information applicable to Phoenix Company is provided below.
|
|
|
20X4 |
20X3 |
20X2 |
20X1 |
20X0 |
Primary Competitor |
|
Debt Ratio (Book-based) |
72% |
69% |
66% |
60% |
58% |
64% |
|
|
TIE |
|
6.5 |
6.0 |
4.9 |
5.8 |
7.2 |
7.0 |
|
Bond Rating (S&P) |
BBB- |
BB+ |
BB |
BBB+ |
AA- |
BBB+ |
What is indicated by Phoenix Company's bond ratings? Do you see anything positive and how does it compare to the primary competitor?
5. General information applicable to Phoenix Company is provided below.
|
|
|
20X4 |
20X3 |
20X2 |
20X1 |
20X0 |
Ind. Average |
|
Debt Ratio (Book-based) |
72% |
69% |
66% |
60% |
58% |
64% |
|
|
TIE |
|
6.5 |
6.0 |
4.9 |
5.8 |
7.2 |
7.0 |
|
Bond Rating (S&P) |
BBB- |
BB+ |
BB |
BBB+ |
AA- |
NA |
What is indicated by this company's TIE? Give a general commentary on the pattern exhibited by the TIE and what it indicates regarding Phoenix's overall debt paying ability.
6. A Company is trying to determine why their overall profit margin is low. Considering the information presented below, where within the multi-step income statement would you recommend that management look to potentially identify and solve the problem and what types of expense items could be a concern for this company?
|
Company B |
20X6 |
20X5 |
20X4 |
20X3 |
20X2 |
Ind. Average |
|
Gross Profit Margin |
51.0% |
51.0% |
49.0% |
50.0% |
51.0% |
50.0% |
|
Oper Profit Margin |
12.0% |
12.0% |
13.0% |
12.0% |
11.0% |
12.0% |
|
Net Profit Margin |
3.0% |
4.0% |
4.0% |
5.0% |
5.0% |
6.0% |
|
7. A few liquidity ratios for Bravo Company are shown below. What do these liquidity ratios reveal to you about Bravo Company's liquidity position? If they were available to you, what additional ratios would you like to review in order to get a clearer picture of the strength or weakness of the Bravo Company? |
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
2014 |
2013 |
2012 |
2011 |
2010 |
Ind. Average |
|
|
|
Current ratio |
2.6 |
2.4 |
2.5 |
2.2 |
1.9 |
1.8 |
|
|
|
Quick Ratio |
0.9 |
0.8 |
1.0 |
0.9 |
1.0 |
0.9 |
|
|
|
Cash Ratio |
0.5 |
0.5 |
0.6 |
0.6 |
0.5 |
0.5 |
8. At year end, a company with significant off-Balance Sheet operating leases has total assets of $90,000,000, and total equity of $36,000,000. The notes to the financial statements disclose the following long-term lease obligations. Complete the adjustment to capitalize these operating leases and compute their debt ratio before and after the adjustment.
|
Year |
Future Lease Obligation |
|
20X1 |
3,000,000 |
|
20X2 |
3,000,000 |
|
20X3 |
2,000,000 |
|
20X4 |
2,000,000 |
|
20X5 |
1,000,000 |
|
20X6 and after |
10,000,000 |
9. Comment on the following from a trend perspective as well as the pros and cons of what this ratio may indicate.
|
|
20X6 |
20X5 |
20X4 |
20X3 |
20X2 |
Ind. Average |
|
DSI (in days) |
17 |
20 |
23 |
24 |
24 |
32 |
-
Rating:
/5
Solution: Using the information below calculate ROA and ROE for this company for 20X4.