Question

The current year financial statements for Blue Water Company and Prime Fish Company are presented below. Blue Water Prime Fish Balance sheet: Cash Accounts receivable (net) Inventory Property & equipment (net) Other assets Total assets Current liabilities Long-term debt (interest rate: 10%) Capital stock $10 par value) Additional paid-in capital Retained earnings Total liabilities and stockholders' equity Income statement: Sales revenue (1/3 on credit) Cost of goods sold Operating expenses Net income Other data: Per share stock price at end of current year Average income tax rate Dividends declared and paid in current year $ 42,200 44,000 93,000 158,000 85,200 $ 422,400 93,000 73,400 156,400 30,200 69,400 $ 422,400 $ 19,800 34,600 47,200 415,400 317,000 $ 834,000 $ 67,000 62,400 524,000 107,200 73,400 $ 834,000 $ 429,000 (235,000) (163,400) $ 30,600 $ 790,000 (401,200) (312,200 $ 76,600 $ 23.2 30% 34,200 $ 27 30% $ 154,000 $ Both companies are in the fish catching and manufacturing business. Both have been in business approximately 10 years, and each has had steady growth. The management of each has a different viewpoint in many respects. Blue Water is more conservative, and as its president has said, "We avoid what we consider to be undue risk.” Neither company is publicly held. Required: 1. Complete a schedule that reflects a ratio analysis of each company. (Round your intermediate calculations and final answers to 2 decimal places. Enter percentage answers rounded to 2 decimal places (i.e. 0.1234 should be entered as 12.34).) Ratio BLUE WATER COMPANY PRIME FISH COMPANY [ 11.95 7.24 % 10.87% 9.18% 7.13 % 1.96 9.70 % 1.46 $ $ 1.02 0.95 1.90 2.72 7.61 Profitability ratios: 1. Return on equity 2. Return on assets 3. Gross profit percentage Net profit margin 5. Earnings per share 6. Quality of income Asset turnover ratios: 7. Total asset turnover 8. Fixed asset turnover 9. Receivable turnover 10. Inventory turnover Liquidity ratios: 11. Current ratio 12. Quick ratio 13. Cash ratio Solvency ratios: 14. Times interest earned ratio 15. Cash coverage ratio 16. Debt/equity ratio Market ratios: 17. Pricelearnings ratio 18. Dividend yield ratio 2.53 8.50 2.84 0.93 0.45 6.25 0.81 0.30 0.65 0.18 11.86 9.43 % 18.47 10.88%

Answer 1

1. Gross profit ratio= gross profit / sales

calculation of gross profit=sales - cost of goods sold

Blue water company GP ratio=(429,000-235,000)/429,000*100=45.22%

Prime fish company Go ratio= (790,000-401,200)/790,000*100=49.22%

Times interest earned ratio= income before interest/interest expense * 100

Blue water company=194,000/163400=118.7%

Prime fish company

= 388,800/312,200=124.54%

Cash coverage ratio= Cash and cash equivalents/current liabilities

Blue water company=42,200/93,000=45.37%

​​​​​Prime fish company=19,800/34,600=57.23%