Question

Activity 10 TEST YOUR UNDERSTANDING A Review of Rata Analysis ORACLE CORPORATION endar 1.79 (P/L/S) En the fiscal Current ratio 1299 1.74 1.70 (PLUS) Det to 0.491 0.492 0.488 (P/L/S) Reum on sales 0.15 0.11 0.14 (PL/S) Return on assets 0.18 0.14 0.18 Sour cure, he, Compact SEC. 2000 1. In the left-hand margin above, circle whether the ratio measures (Profitability, short-term (Liquidity - the ability to pay current debt, or long-term (Solvency - the ability to pay long-term det 2. For och short-term liquidity ratio above, circle the ratio indicating the greatest ability to pay cute liabilities for the three years of information presented 3. This company appears to have not have the ability to pay current debt. For each long-term solvency ratio sbove, circle the ratio indicating the least amount of debt financing for the three years of information presented 4. This company relies more heavily on (debt/equity) to finance assets. For each profitability ratio above, circle the ratio indicating the greatest profitability over the three years of information presented. The profitability of this company appears to be strong / weak). 5. Refer to all of the ratio information presented above. This company appears to be strong / weak). Explain your answer. 6. The ratio that measures the proportion of total assets finanood with liabilities is (Return on sales/Return on assets / Current ratio / Debt ratio). 7. The ratio that measures the proportion of net sales resulting in profits is (Return on sales / Return on assets / Current ratio / Debt ratio). 8. The ratio that measures how effectively assets are used to generate profits is (Return on sales/ Return on assets / Current ratio/Debt ratio). 9. A supplier extending credit to a company for 60 days would be most interested in examining the (Return on sales / Return on assets / Current ratio / Debt ratio). Introduction Page 12

Answer 1

The ratio's measures (1) profitability, short term (2) liquidity, the ability to pay current debt or long term (s) solvency - the ability to pay long term debts are: @ current ration Short term liquidity ability to pay current debt 6 Debt Ratio long term solvency - the ability to pay long term debt @ Return en sales profitability (P) @ This company appears to have ability to pay current debt because the company has sufficient carent assets to pay current liabilities & The company relies more heavily on equity to finance assets because equity is more than debt financing. 4 The Profit of this company appears to be Strong because they are regularly earning pofits. 6 The company appears to be strong because company is earning continous earning profit last three years. The company has more cament liability that corrent Assets to pay off the current liabilities. The company finance their assets through equity. therefore there is no interest payment and assets are generating good retorn. 6 The ratio that measures the proportion of total assets financed with liabilities is Debt Ratio

Ô The ratio that measures the proportion of met sales resulting in profit is Return on sale 8 The ratio that measures how effectively assets are used to generate profit is Return an assets A supplier extending credit to a company for Go days woud be most interested in exeaming current Ratio