Question

1. Given the 2019 ratios of Verizon wireless what do EACH of these ratios indicate about the company specifically? (not just as a whole)

2. Lastly, at the end, in one paragraph what do these calculations (all together) mean for the companies financial health?

Answers must be broken down into everyday language and not in "financial talk"

• Profit ratios:
  gross profit margin	(gross profit / sales)*100
  gross profit	77142000
  sales	131868000
  gross profit margin	58.50%
  operating profit margin	(operating profit / sales)*100
  operating profit	30564000
  sales	131868000
  operating profit margin	23.18%
  net profit margin	(net income / sales)*100
  net income	19265000
  sales	131868000
  net profit margin	14.61%
  Liquidity ratios:
  current ratio	current assets / current liabilities
  current assets	37473000
  current liabilities	44868000
  current ratio	0.84
  quick ratio	cash+net receivable / current liabilities
  cash	2594000
  net receivable	25429000
  total	28023000
  current liabilities	44868000
  quick ratio	0.62
  cash ratio	(cash and cash equivalent + short term investments) / current liabilities
  cash and cash equivalent	2594000.00
  current liabilities	44868000
  cash ratio	0.06
  Activity ratios:
  receivable turnover ratio	sales / ending receivable
  sales	131868000
  ending receivable	25429000
  receivable turnover ratio	5.19
  days sales outstanding	365 days / receivable turnover ratio
  receivable turnover ratio	5.19
  days sales outstanding	70.33
  inventory turnover ratio	cost of goods sold / ending inventory
  cost of goods sold	54726000
  ending inventory	1422000
  inventory turnover ratio	38.49
  inventory days	365 days / inventory turnover
  inventory turnover	38.49
  inventory days	9.48
  Leverage ratios:
  debt ratio	total debt / total assets
  long-term debt	100712000
  total assets	291727000
  debt ratio	0.35
  debt-to-equity	total debt / total equity
  long-term debt	100712000
  total equity	61395000
  debt-to-equity	1.64
  shareholder return ratio	net income / total equity
  net income	19265000
  total equity	61395000
  shareholder return ratio	0.31

Answer 1

1.

Gross profit margin
Gross profit	77142000
sales	131868000
gross profit margin	58.5%

Gross profit margin is 58.5% that means every dollar of sales generated, the company earns 58.5 cents in profits before expenses are paid.

Gross profit ratio means percentage of sales exceed the cost of goods sold. It shows how efficiently a company can produce and sell its products.

Gross profit = Total sales - Cost of goods sold.

2.

operating profit margin	(operating profit / sales)*100
operating profit	30564000
sales	131868000
operating profit margin	23.18%

Profitability ratio that measures what percentage of total revenues is made up by operating income. The revenues are left over after all the variable or operating costs have been paid.

This means that 76 cents on every dollar of sales is used to pay for variable costs. Only 23 cents remains to cover all non-operating expenses or fixed costs.

3.

net profit margin	(net income / sales)*100
net income	19265000
sales	131868000
net profit margin	14.61%

The net profit margin ratio is the percentage of each dollar earned by a business ends up as profit at the end of the year. It shows how much net income a business makes from each dollar of sales.

This means we have 14.61% of its revenue left to be utilized either to pay back the shareholders or to reinvest in the business.

4.

current ratio	current assets / current liabilities
current assets	37473000
current liabilities	44868000
current ratio	0.84

This ratio shows liquidity of a company and how easily that company will be able to pay off its current liabilities.This ratio expresses a firm’s current debt in terms of current assets. So a current ratio of 4 would mean that the company has 4 times more current assets than current liabilities.A higher current ratio is always more favorable than a lower current ratio because it shows the company can more easily make current debt payments.

The company has enough current assets to pay off 84 percent of his current liabilities. This shows that Company highly leveraged and highly risky. Banks would prefer a current ratio of at least 1 or 2, so that all the current liabilities would be covered by the current assets.

5.

quick ratio	cash+net receivable / current liabilities
cash	2594000
net receivable	25429000
total	28023000
current liabilities	44868000
quick ratio	0.62

This means that Company can pay off only 62% of her current liabilities with quick assets. Remaining balance of current liabilities is to be paid with the other assets.

Measures the ability of a company to pay its current liabilities when they come due with only quick assets. Quick assets are current assets that can be converted to cash within 90 days or in the short-term. Cash, cash equivalents, short-term investments or marketable securities, and current accounts receivable are considered quick assets.

6.

cash ratio	(cash and cash equivalent + short term investments) / current liabilities
cash and cash equivalent	2594000.00
current liabilities	44868000
cash ratio	0.06

The cash ratio shows how well a company can pay off its current liabilities with only cash and cash equivalents. This ratio shows cash and equivalents as a percentage of current liabilities.

ratio is .06 This means that company only has enough cash and equivalents to pay off 6 percent of her current liabilities.

7.

receivable turnover ratio	sales / ending receivable
sales	131868000
ending receivable	25429000
receivable turnover ratio	5.19