Assessing a Firm’s Future Financial Health

Case Study Answer Sheet Profitability Ratios:

income statement

1. 1,307 | 48,769 | 2.68% 2. decrease | 3.60% 3. increase | increase | income tax paid 4. 15,249 | 1,824 | 11.96% | decrease | 14.67% 5. 12,193 | 1,307 | 10.72% | deterioration | 15.22%

Activity Ratios:

1. 48,769 | 22,780 | deteriorated | 2.17 | 2.14 2. 7,380 | 133.614 | 55.23 | improvement | 58.68 3. 8,220 | 29,700 | 3.61 | deterioration | 4.76 4. 5,160 | 48,769 | 9.45 | improvement | 7.98 5. net profit margin | return on invested capital | return on equity

total asset turnover | average collection period | inventory turnover ratio | fixed asset turnover ratio

6. less efficient use of inventory | less efficient use of total assets | increase in COGS as a percentage of sales | increase in operating expenses as a percentage of sales

Leverage Ratios:

1. 10,587 | 46.47% | decrease | 48.55% 2. 42.58% 3. 2,528 | 517 | 4.89 | deterioration | 7.12 4. 2,820 | 9.49% | increase | 8.42% | less 5. equity growing faster than net income | increased expenses (COGS and

operating) as a percentage of revenues 6. increased

Liquidity Ratios:

1. 17,620 | 7,531 | 2.34 | deterioration | 2.41 2. 1.25 | deterioration | 1.52

Unidentified Industries:

A. Aerospace manufacturer B. Electric utility C. Supermarket chain D. Japanese trading company E. Automobile manufacturer