Question


Dan Ervin was recently hired by East Coast Yachts to assist the company with its short-term financial planning and to evaluat

WUsail Inc. Income Statement in $ millions) Sales 5,871.00 Cost of goods sold 3,430.00 Gross Profit 2,44100 Selling, general,

Long-term liabilities Long-term debt Total long-term liabilities 907.00 907.00 883.00 883.00 Stockholders equity Common stoc

Note: At least one financial metric such as Survival Revnue, NOPAT, Ratio etc should be used to support answer.

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Answer #1
FINANCIAL HEALTH
Current Ratio=Current Assets /Current Liabilities
Current Ratio= 1.735469 (1463/843)
Time Interest Earned =Operating Income/Interest expenses
Time Interest Earned = 15.21905 (1598/105)
Considering Current Ratio and Time interest earned, the company can meet its finncial obligations
PROFITABILITY OF THE FIRM
Net Profit Margin=Net Income/Sales
Net Profit Margin= 15.26% (896/5871)
Return on Equity=Net Income /Average Equity
Average Equity=(2519+1848)/2 2183.5
Return on Equity 41.04% (896/2183)
Return on Assets =Net Income/(Average total assets)
Average Total Assets=(4269+3536)/2= 3902.5
Return on Assets = 22.96% (896/3902.5)
The Firm has good profitability
OPERATIONAL EFFICIENCY
Asset Turnover =Sales/Average Total Asets 1.50442 (5871/3902.5)
Accounts Receivable Turnover=Sales/Average Accounts Receivable
Average accounts receivable=(622+574)/2 598
Accounts Receivable Turnover= 9.817726 (5871/598)
Inventory Turnover=Cost of good sold/Average Inventory
Average Inventory=(493+510)/2 501.5
Cost of goods sold 3430
Inventory Turnover= 6.839482
Considering Assets turnover, Accounts Receivable Turnover and Inventory turnover, the firm is operationally efficient
IMPROVE PROFITABILITY
Profitability can be improved by reduction in Selling and Administrative expenses
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