In: Finance
A company has got $500 in cash and cash equivalents, $300 in
inventory and $200 in account receivables. The firm has long term
assets of $500. The firm has accounts payables of $200. All other
current liabilities total $400. The firm had sales of $10000, EBIT
of $5000, interest expenses of $2000 and net income of $800.
Compute the following ratios:
Current ratio
DSO
TIE
profit margin
Total asset turnover
1. Calculation of Current Ratio:
Where,
Current Assets = Accounts receivables + Inventory + Cash and cash equivalents = 200 + 300 + 500 = $ 1000
Current liabilities = accounts payables + other current liabilities = 200 + 400 = $ 600
Current Ratio = 1.667
2. Calculation of DSO (Days Sales Outstanding):
DSO = 7.3 Days
3. Calculation of TIE (Times Interest Earned) :
TIE = 2.5
4. Calculation of profit margin :
Profit Margin = 8 %
5. Calculation of Total asset turnover:
Where,
Total Assets = Long term assets + Current Assets = 500 + 1000 = $ 1500
Total asset turnover = 6.667