Calculate the following ratios for 2014 and show the steps involved:
a) Inventory turnover ratio
b) average days in inventory
c) receivables turnover ratio
d) average collection period
e) asset turnover ratio
f) profit margin on sales
g) return on assets
h) return on shareholders equity
i) equity multiplier
j) return on shareholders equity using the Du Port framework
Note: See attached balance sheet and income statement below as reference
Calculate the following ratios for 2014 and show the steps involved:
a) Inventory turnover ratio
Ans. Inventory Turnover ratio = Cost of Goods Sold [COGS] / Average Inventory
For Parent Company = 33391238/ [10847780+8259331]/2
= 33391238/ [19107111/2]
= 33391238/9553555.50
= 3.50 approx.
For Consolidation = 54866268 [16991395+14235574]/2
= 54866268/ [33726969/2]
= 54866268/16863484.50
= 3.25 approx.
Ans. b) Average days in inventory = 365 / Inventory Turnover Ratio
For Parent Company = 365/ 3.5
= 104.29
For Consolidation = 365/3.25
= 112.31 approx
Ans. c) Receivables Turnover Ratio = Net Credit Sales / [Average Accounts Receivables]
* All sales assumed credit and net
For Parent Company = 66988731/ [4980041+5020850]/2
= 66988731/ [10000891/2]
= 66988731/5000445.50
= 13.40 approx.
For Consolidation = 94292989/[8991151+8493338]/2
= 94292989 [ 17484489/2]
= 94292989/8742244.5
= 10.79 approx.
Ans d) Average collection period = 365/Receivable Turnover
For Parent Company = 365/ 13.4
= 27.24 approx
For Consolidation = 365/10.79
= 33.83 approx
Ans. e) Asset turnover ratio = Net Sales / Average Total Assets
For Parent Company = 66988731/ [188111440+180207459]/2
= 66988731/ [368318899/2]
= 66988731/184159450
= 0.36 approx.
For Consolidation = 94292989/[205106210+204174931]/2
= 94292989 [ 409281141/2]
= 94292989/204640571
= 0.46 approx.
Ans. f) Profit margin on sales = Net Profit / Net Sales
For Parent Company = 21332976/ 66988731
= 0.32 approx
For Consolidation = 27426167/ 94292989
= 0.29 approx
Ans g) Return on assets = Net Incomme/ Average Total Assets
= Net Income/[Op.Total Assets+Clo. Total Assests]2]
For Parent Co. =21332976/[188111440+18020749]2
=21332976/368318899/2
=21332976/1841940
=0.12 approx
Ans h) Return on shareholders equity= Net Income / Equity
For Parent Company = 21332976/121605408 =17.54%
For Consolidation = 27426167/142063220 =19.31%
Ans i) Equity multiplier= Total Assets/Equity
For Parent Company =180207459/121605408 =1.48
For Consolidation= 1.44
Ans j) Return on shareholders equity using the Du Pont framework
= Net Profit Margin x Assets Turnover x Equity Multiplier
= Net Income /Revenue x Revenue/Averagea TOTAL ASSETS x AVERAGE TOTAL ASSETS/Average Equity
= Net Income / Average Equity
For Parents Company =21332976/[121605408+115272432]/2 = 21332976/118438920=0.18 =18%
For cConsolidate= 27426167 /[142063220+1296337053]/2 =27426167/135850137 =0.20188 =20.19%
=
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