Question

Calculator Ratio Improvement or Deterioration indicate if the ratio got better or worse from the prior year Current Year Prior Year Better or Worse 1: Asset Turnover 4.1 3.1 Worse 12.0 79.0 75.0 9.0% 2 Price-Earnings Ratio 13.0 3 Number of Days' Sales in Inventory 4 Rate Earned on Stockholders Equity 7.0% 5 Ratio of Fixed Assets to Long-term Liabilities 2.1 6. Number of Days' Sales in Receivables 7 Number of Times Interest Charges Earned 6.2 3.1 35.0 40.0 8.2 8: Rate Earned on Total Assets 17.8% 15.8% All work saved. Email Instruc

Answer 1

Ratios	Current	Prior	Better/Worse
Asset turnover	4.1	3.1	Better
P/E ratio	13.0	12.0	Better
Number of Days' Sales in inventory	79.0	75.0	Worse
Rate earned on Stockholders equity	7.0%	9.0%	Worse
Ratio of Fixed Assets to Long term liabilities	2.1	3.1	Worse
Number of Days' Sales in receivable	35.0	40.0	Better
Number of times interest charges earned	6.2	8.2	Worse
Rate earned on total assets	17.8%	15.8%	Better

Reasons:-

1.Asset Turnover = Ratio of Sales / Average total assets

Higher ratio indicates the assets are being used more efficiently to generate revenue.

2.P/E Ratio = Price per share / Earning per share

Higher ratio indicates investors are willing to pay a higher price relative to its earning indication of better future growth potential.

3.Number of Days' Sales in inventory = (Average inventory / COGS) * 365

Higher ratio indicates company is taking longer time to convert its inventory into sales meaning sales are slowing down.

4.Rate earned on Stockholders equity = Net income / Stock holders equity

Lower ratio indicates lower return on capital invested.

5.Ratio of Fixed Assets to Long term liabilities = Fixed Assets / Long term liabilities

Lower ratio indicates reduced debt capacity of the company.

6.Number of Days' Sales in receivable = (Average receivables / Net sales) * 365

Lower ratio indicates faster collection of debts from company's debtors.

7.Number of times interest charges earned = EBIT / Interest expense

Lower ratio indicates reduced capacity to pay interest on Loan obligations.

8. Rate earned on total assets = Net income / Average total assets

Higher ratio indicates Better return earned on total assets employed.