Basic Ratio Analysis
Rochester Corporation is engaged primarily in the business of manufacturing raincoats and umbrellas. Shown below are selected information from a recent annual report. (Dollar amounts are stated in thousands.)
| Beginning of the Year | End of the Year |
Total current assets | $ 43,000 | $ 82,000 |
Total current liabilities | 54,000 | 75,000 |
Total assets | 230,000 | 390,000 |
Total stockholders’ equity | 120,000 | 205,000 |
Operating income | 74,000 |
|
Net income | 51,000 |
|
The company has long-term liabilities that bear interest at annual rates ranging from 8 percent to 12 percent.
Instructions
a. Compute the company’s current ratio at ( 1 ) the beginning of the year and ( 2 ) the end of the year. (Carry to two decimal places.)
b. Compute the company’s working capital at ( 1 ) the beginning of the year and ( 2 ) the end of the year. (Express dollar amounts in thousands.)
c. Is the company’s short-term debt-paying ability improving or deteriorating?
d. Compute the company’s ( 1 ) return on average total assets and ( 2 ) return on average stockholders’ equity. (Round average assets and average equity to the nearest dollar and final computations to the nearest 1 percent.)
e. As an equity investor, do you think that Rochester’s management is utilizing the company’s resources in a reasonably efficient manner? Explain
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