Analyze its overall financial situation from both a cross-sectional and a time-series viewpoint. Break your analysis...

Analyze its overall financial situation from both a cross-sectional and a time-series viewpoint. Break your analysis into evaluations of the firm’s liquidity, activity, debt, profitability, and market.

Ratio	Actual 2017	Actual 2018	Industry average, 2019
Current ratio	1.40	1.55	1.85
Quick ratio	1.00	0.92	1.05
Inventory turnover	9.52	9.21	8.60
Average collection period	45.6 days	36.9 days	35.5 days
Average payment period	59.3 days	61.6 days	46.4 days
Total asset turnover	0.74	0.80	0.74
Debt ratio	0.20	0.20	0.30
Times interest earned ratio	8.2	7.3	8.0
Fixed-payment coverage ratio	4.5	4.2	4.2
Gross profit margin	0.30	0.27	0.25
Operating profit margin	0.12	0.12	0.10
Net profit margin	0.062	0.062	0.053
Return on total assets (ROA)	0.045	0.050	0.040
Return on common equity (ROE)	0.061	0.067	0.066
Earnings per share (EPS)	$1.75	$2.20	$1.50
Price/earnings (P/E) ratio	12.0	10.5	11.2
Market/book (M/B) ratio	1.20	1.05	1.10
Historical and Industry Average Ratios for Sterling Company

Expert Solution

jeff jeffy answered 2 years ago

propose a situation with figures to explain the difference between cross sectional and time series data.

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1. Break-even analysis To be profitable, a firm has recover its costs. These costs include both...

1. Break-even analysis To be profitable, a firm has recover its costs. These costs include both its fixed and its variable costs. One way that a firm evaluates at what stage it would recover the invested costs is to calculate how many units or how much in dollar sales is necessary for the firm to earn a profit. Consider the case of Petrox Oil Co.: Petrox Oil Co. is considering a project that will have fixed costs of $15,000,000. The...

4. Break-even analysis To be profitable, a firm has recover its costs. These costs include both...

4. Break-even analysis To be profitable, a firm has recover its costs. These costs include both its fixed and its variable costs. One way that a firm evaluates at what stage it would recover the invested costs is to calculate how many units or how much in dollar sales is necessary for the firm to earn a profit. Consider the case of Petrox Oil Co.: Petrox Oil Co. is considering a project that will have fixed costs of $10,000,000. The...

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