Question

In: Finance

WRITE AT LEAST THREE PARAGRAPH. The below table provides a partial Ratio Analysis of Jim’s Appliance...

WRITE AT LEAST THREE PARAGRAPH.

The below table provides a partial Ratio Analysis of Jim’s Appliance Shop. Identify the trouble spots that the ratio analysis suggests and provide some insights on how these trouble spots can be corrected (give some specific suggestions).

Ratio                            Jim’s Appliance Shop                Industry Average

Current Ratio                           1.70                                         1.88                   

Debt Ratio                                0.70:1                                      0.73:1             

Debt to Net Worth Ratio           2.70:1                                      2.60:1  

Solutions

Expert Solution

Solution : Current ratio: Jim's Appliance Shop = 1.70, Industry average = 1.88 The current ratio is the ratio which gives the idea about liquidity and higher value is desirable. In this case, the company has a lower ratio than industry average so it is a cause for concern. Current ratio = Current Asset / current Liability and Current Asset has Cash, Account receivable, inventory etc. while current liability has Account payable, short-term loan, accrued expenses etc. So, in order to make this ratio better, the company needs to increase the current asset or decrease the current liability. So the company can reduce the account payable to look this ratio better. Debt Ratio: Debt ratio is the ratio of debt o total asset (or debt + equity ) Debt ratio for the company is = 0.70:1 and while industry average is = 0.73:1. The lower debt ratio is desirable as compared to industry average as it shows that the company will not face any solvency issue. Debt to Net Worth Ratio: Debt to equity or Debt to net worth ratio is the ratio that shows how much company has debt as compared to its equity and the lower value is desirable as compared to the industry average. In the given question the company has 2.70:1 while the industry average is 2.60:1. So the company has a higher ratio than the industry average and it is not desirable. So the company can make this ratio better by either reducing debt or increasing equity. Equity can be increased by increasing the retained earning ( increase the profitability as net income after paying the dividends goes to retained earning )


Related Solutions

: The below table provides a partial Ratio Analysis of Jim’s Appliance Shop. Identify the trouble...
: The below table provides a partial Ratio Analysis of Jim’s Appliance Shop. Identify the trouble spots that the ratio analysis suggests and provide some insights on how these trouble spots can be corrected (give some specific suggestions). Ratio                                      Jim’s Appliance Shop                      Industry Average Current Ratio                                     1.70                                                        1.88                           Debt Ratio                                           0.70:1                                                    0.73:1                    Debt to Net Worth Ratio               2.70:1                                                    2.60:1   
wright a paragraph about ratio analysis?
wright a paragraph about ratio analysis?
Write a paragraph with a short background on the topic and at least three reasons supporting...
Write a paragraph with a short background on the topic and at least three reasons supporting whether DXM (dextromethorphan) should be prescription only or if DXM should NOT be prescription only.
The Table below provides quotes from three Banks A,B, and C for the British Pound in...
The Table below provides quotes from three Banks A,B, and C for the British Pound in U.S. dollars (A), the US dollar in Euros (B) and the British Pound in Euros (C). Bid price Ask price A - USD/POUND 1.4871 1.4900 B - EURO/USD 0.8794 0.8852 C - EUR/POUND 1.3050 1.3062 (a) Calculate the appropriate EUR/POUND bid and -ask cross exchange rates. (b) Give your answers to (a), which currency is overvalued? Explain your answer. (c) Assuming no other trading...
the table below provides information for a probability distribution. use the table below to answer the...
the table below provides information for a probability distribution. use the table below to answer the following questions. X p(X) 0 .10 1 .60 2 .30 a. calculate the variance. b. calculate the standard deviation
Your design team has developed a food chopping appliance. Write a one paragraph description of the...
Your design team has developed a food chopping appliance. Write a one paragraph description of the verification tests and a one paragraph description of the validation tests.
Read carefully the below problem text and write the following proposal sections in paragraph format: Analysis...
Read carefully the below problem text and write the following proposal sections in paragraph format: Analysis of the problem The reasons Proposed solutions Risk to the organisation if the proposed changes are not made Hunter Co.: The Hunter Company is a chain of restaurants that are widely distributed across the Kingdom of Saudi Arabia. The business started in 1995 with one branch in Jeddah. It was very successful as it was always crowded and widely complimented by customers in terms...
The table below provides information about three firms (A, B, C): CO2 Pollution produced by each...
The table below provides information about three firms (A, B, C): CO2 Pollution produced by each firm and costs to clean up pollution (by unit). Firm Pollution produced by firm Costs to clean up pollution (by unit) A 70 units $20 B 80 units $25 C 50 units $10 The goal is to reduce pollution to 120 units (by three firms). That is, each firm is allowed to produce 40 units of pollution. Each firm is given 40 units tradable...
The table below provides details on three government bonds (annual coupon payment, par value = $100)...
The table below provides details on three government bonds (annual coupon payment, par value = $100) Term to maturity (years) Coupon rate (% pa) Yield-to-maturity (% pa) 1 9.6 8.52 2 6.0 8.87 3 10.0 8.98 Another 3-year government bond paying a coupon rate of 1% pa (annual coupon payment, par value = $100). Is the yield of this bond equal to 9%? Why or why not? justify with calculation. All these bonds are issued by the same government.
The partial data in the table below are for the economy of Arinaka. Planned investment, government...
The partial data in the table below are for the economy of Arinaka. Planned investment, government spending, and all taxes are autonomous. You may assume that the MPC, MPS, and MPM are constant. a. Fill in the blanks in table below. Y T YD C S I G XN AE Unplanned Investment $400 $40 $320 $40 $60 $50 $10 450 45 –5 500 550 b. The value of equilibrium income is $  . c. If planned investment decreases by $10, the...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT