Question

5. Calculate the 2015 financial ratios for Phocbe Corporation rounded to the nearest tenth and put a checkmark in tbe row in which Phorbe's ratios are better than the industry average: Ratio Gross Profit Margin Net Profit Margin Current Ratio Inventory Turnover Receivables Turnover Phoebe Corporation (2015) Industry Averages Phocbe is Better 55.0% 27.5% 3.3 % % 15.5 8.5 Select Financial Ratios What It Measures Eficiency of operations and product pricing Lisiency afher all expenses are considered Short-run debt-paying ability Caleulation Ratio Type Profitability (Gross Profia/Sales) 100 Gross profit margin Net profit margin Profitability (Net income/Sales) 100 Current Assets/Current Liabilities Cost of Goods Sold/Average Liquidity Current ratio Management's ability to control investment in inventory Eflectiveness of collection and credit policies. Activity Inventory Turnover ratio Accounts Receivable Turnover Inventory Annual Credit Sales/Average Receivables Activity Notes Average inventory (Beginning inventory + Ending inventory)/2; Ending inventory for 2014 Beginning inventory for 2015 Average receivables (Beginning receivables + Ending receivables) /2; Ending receivables for 2014 Beginning receivables for 2015 All sales are credit sales (no cash sales are involved) Select Corporate Financial Data: Income Statement Data: 2015 ($000) 294,500 112.000 182,500 75.000 107,500 32.250 75,250 Net Sales Cost of Goods Sold Gross Profit Operating Expenses Operating Income Income Taxes Net Profit

Answer 1

PARTICULARS	RATIO	CALCULATION
Gross profit margin	0.619694	182500/294500
Net profit margin	0.255518	75250/294500
Current Ratio	2.596154	270000/104000
Inventory Turnover Ratio	17.23077	112000/((6000+7000)/2)
Accounts Receivable Turnover Ratio	6.472527	294500/((63000+28000)/2)

PARTICULARS	Phoebe's Ratio	Industry Avg	Pheobe is better
Gross profit margin	62.0%	55%	Yes
Net profit margin	25.6%	27.50%	No
Current Ratio	2.6	3.3	No
Inventory Turnover Ratio	17.2	15.5	Yes
Accounts Receivable Turnover Ratio	6.5	8.5	No

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