Problem

Basic Ratio AnalysisRochester Corporation is engaged primarily in the business of manufact...

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

Step-by-Step Solution

Request Professional Solution

Request Solution!

We need at least 10 more requests to produce the solution.

0 / 10 have requested this problem solution

The more requests, the faster the answer.

Request! (Login Required)


All students who have requested the solution will be notified once they are available.
Add your Solution
Textbook Solutions and Answers Search