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Questions
Calculate / Discuss
a) WC & CR /
relative Liquidity.
b) DAR, TIE /
Solvency
c) ROA, PMR /
Relative
Profitability
d) DAR after
adjusting for
leases /
Implications
P13-3A
Questions
a) Calculate
1) PMR
2) GPR
3) TATO
4) EPS
5) PE
6) POR
7) DAR
b) Improvement in
financial position
and operating
results
20%
14%
BYP13 - 7
J. Putnam Corporation
2014
2013
Current Ratio
3.1
2.1
= CA CL
2.8
2.2
= Sales
Avg(TA)
0.1
0.2
= CFO
Avg(TL)
+ 32% -8%
EPS
$3.30 $2.50
BYP13 - 7
J. Putnam Corporation
2014
2013
Current Ratio
3.1
2.1
2.8
2.2
0.1
0.2
+ 32%
- 8%
EPS
$3.30
$2.50
3 other ratios that you would want to calculate for this company?
Putnam
2014
2013
CR
3.1
2.1
TATO
2.8
2.2
CDCR
0.1
0.2
+ 32%
- 8%
NI
EPS
$3.30 $2.50
Discuss implications
of the ratios for the
lending decisions.
Does the
information
paint a favorable
picture?
Are the ratios
relevant to the
decision?
Putnam
2014
2013
CR
3.1
2.1
TATO
2.8
2.2
CDCR
0.1
0.2
+ 32%
- 8%
NI
EPS
$3.30 $2.50
Discuss implications
of the ratios for the
lending decisions.
Does the
information
paint a favorable
picture?
Are the ratios
relevant to the
decision?
10%
55%
45%
OE as % of Sales = 4002000
25%
1.8x
25%
2%
27%
-180
3.0x
EBT
360
1.39x
Tax Expenses
144
40%
Net Profit
216
10.8%
33%
2.5x
Less COGS
Gross Profit
Less Operating Exp
2,000
-1,100
900
-400
500
40
540
Dividend Paid
72
Increase in RE
144
Company X
Company Y
Current Ratio
Quick Ratio
3.3
2
3.5
2
73
73
66
63
60
42
Operating Cycle
Cash Conversion Cycle
146
80
123
81
117
Cash
received
Order
Stock
Placed Arrives
Inventory period
A/R or
Avg. Collection period
Time
Operating cycle or
Gross WC cycle
= Inv Days + AR Days
Cash cycle or
Net WC cycle or
Financing Period = Inv +
AR AP Days
Balance Sheet
2016
2015
Total Assets
1,600
1,200
1,000
-300
700
-200
700
500
Investments
100
100
Current Assets
800
600
Avg
Balance Sheet
1,400
850
-150
600
700
Inventory
250
200
225
A/R
300
250
275
Cash & CE
160
100
Current Liabilities
400
350
A/P
140
100
110
150
200
120
150
80
60
1,000
700
850
2016
2015
Quick Assets
550
400
Total
Borrowings
190
210
200
Total Liabilities
600
500
550
1190
910
1050
Capital
Employed
Avg
Balance Sheet
2016
2,000
Total Assets
1,600
Less COGS
1,100
Gross Profit
Less Operating Exp
Operating Profit
Add Other Income /
Losses
EBIT
Less Interest Expenses
900
-400
500
40
540
-180
EBT
360
Tax Expenses
144
Net Profit
216
Dividend Paid
72
Increase in RE
144
2015
Avg
1,200
1,400
1,000
700
850
-300
-200
-150
700
500
600
Investments
100
100
100
Current Assets
800
600
700
Inventory
250
200
225
A/R
300
250
275
Cash & CE
160
100
125
Other CA
90
50
75
Current Liabilities
400
350
A/P
140
100
120
110
150
130
Other CL
150
100
125
200
150
80
60
70
120
90
105
1,000
700
Shareholders Equity
Transaction
Ratio Formula
Transactions
Ratio Formula
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