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Assignment 3 Van Tran Diem Thuy

1. Some Boral’s ratios for 2007 and 2008

a)Current ratio = current assetscurrent liabilities =


Current ratio2008 = 1,570.81,025.3 = 1.53 Current ratio2007 = 1,451.0921.8 = 1.57

b) Quick ratio = (cash + short-term securities + receivables)current liabilities =

Quick ratio2008 = (47.4 + 881.7+39.8)1,025.3 = 0.944 Quick ratio2007 =


(35.7 + 799.9+37.5)921.8 = 0.947

c) Days in inventory = average inventorycost of goods sold/365 =


Days in inventory 2008 = (600.1 + 59.8 + 584.0 + 126.4)/23,426.5/365 = 685.159.387
= 72.99

Days in inventory 2007 = ( 584.0 + 126.4+528.5+120.7)/23,056.5/365 = 679.88.37 =


81.22

There was an improvement in term of Days in inventory during 2007-2008. Boral


decreased the number of days goods stays in inventory before it is sold. However, the
ratio of days in inventory in 2008 was still a quite high number (72.99). It may be a result
of the economic recession which partially affected on Boral’s business.

d) Debt Ratio = (long-term debt + value of leases)(long-term debt + value of leases +


equity) =
Debt Ratio 2008 = 1,515.31,515.3 + 2,909.6 = 0.34 Debt Ratio 2007 =
1,492.41,492.4 + 2,987.3 = 0.33

e) Times Interest Earned = (EBIT + depreciation)interest =


Times Interest Earned 2008 = 416.1 111.9 = 3.72 Times Interest Earned 2007 =
530.9110.5 = 4.80

There was a drop in term of Times Interest Earned during 2007-2008. Boral only can cover
its interest charges at 3.72 times in 2008. It indicates a difficulty in the company’s
business where EBITdecreased and Boral had to face a higher interest.

f) Return on Assets (ROA) = EBIT-taxaverage total assets = salesassets x EBIT -


taxsales =
Assignment 3 Van Tran Diem Thuy

ROA 2008 = 5,198.5(5,895.0 + 5,816.6)/2 x (416.1 - 62.0)5,198.5 = 0.887 x 0.068 =


0.060

ROA 2007 = 4909.0(5816.6 +5587.0)/2 x (530.9 - 122.3)4909.0 = 0.86 x 0.083 = 0.071

There was a decrease in ROA during 2007-2008. ROA’s components also indicate a
decrease in profit margin (from 0.083 to 0.068).

g) Return on Equity (ROE) = EBIT-tax-interestequity =


ROE = EBIT-tax-interestequity = assetsequity x salesassets x EBIT - taxsales x EBIT -
tax-interestEBIT - tax =
= leverage ratio x sales-to-assets ratio x profit margin x “debt
burden”

ROE 2008 = (5,895.0 + 5,816.6)/2(2,909.6 + 2,987.3)/2 x 5,198.5(5,895.0 + 5,816.6)/2 x


(416.1 - 62.0)5,198.5 x 242.2(416.1 - 62.0) =

= 1.986 x 0.887 x 0.068 x


0.684

ROE 2008 = 0.082

ROE 2007 = (5816.6 + 5587.0)/2(2987.3 + 2755)/2 x 4909.0(5816.6 + 5587.0)/2 x


(530.9 - 122.3)4909.0 x 298.1(530.9 - 122.3) =

= 1.986 x 0.86 x 0.083


x 0.73

ROE 2007 = 0.103

There was also a decrease in ROE. ROE’s components show that the reason for this
decrease is drops in profit margin and “debt burden”.

3. Internal Growth Rate = Retained Earnings Net Assets = Retained Earnings net income
x net income equity x equity net assets

Internal Growth Rate 2008 = 1121.5242.2 x 242.2 2909.6 x 2909.62909.6 = 4.63 x


0.083 x 1 = 38.4%

Internal Growth Rate 2007 = 1148.2 298.1 x 298.12987.3 x 2987.32987.3 = 3.85 x


0.099 x 1 = 38.1%

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