Table 3.1 in Chapter 3 presents financial statements over the period2008 through 2011 for R&E Supplies, Inc.
a. Use these statements to calculate as many of the ratios in Table 2.2 as you can.
b. What insights do these ratios provide about R&E’s financial performance? What problems, if any, does the company appear to have?
TABLE 3.1 Financial Statements for R&E Supplies, Inc., December 31, 2008–2011 ($ thousands)
TABLE 2.2 Ratio Analysis of Sensient Technologies Corporation, 2006–2010, and Industry Medians, 2010
| 2006 | 2007 | 2008 | 2009 | 2010 | Industry Average* |
Profitability ratios: | ||||||
Return on equity (%) | 9.4 | 9.6 | 11.1 | 9.5 | 10.9 | 18.1 |
Return on assets (%) | 4.6 | 5.0 | 6.0 | 5.4 | 6.7 | 7.5 |
Return on invested capital (%) | 7.4 | 7.8 | 8.7 | 7.7 | 9.0 | 12.5 |
Profit margin (%) | 6.0 | 6.6 | 7.3 | 7.2 | 8.1 | 8.4 |
Gross margin (%) | 34.2 | 34.3 | 34.0 | 34.2 | 34.0 | 33.5 |
Price-to-earnings ratio (X) | 17.2 | 17.2 | 12.7 | 14.8 | 17.0 | 17.7 |
Turnover-control ratios: | ||||||
Asset turnover (X) | 0.8 | 0.8 | 0.8 | 0.8 | 0.8 | 0.9 |
Fixed-asset turnover (X) | 2.8 | 2.8 | 3.1 | 2.8 | 3.1 | 4.0 |
Inventory turnover (X) | 2.2 | 2.2 | 2.2 | 2.0 | 2.2 | 4.1 |
Collection period (days) | 59.2 | 60.5 | 58.0 | 60.8 | 60.1 | 58.9 |
Days' sales in cash (days) | 1.7 | 3.2 | 2.5 | 3.7 | 3.9 | 32.9 |
Payables period (days) | 40.8 | 41.7 | 36.6 | 41.1 | 39.9 | 51.3 |
Leverage and liquidity ratios: | ||||||
Assets to equity (X) | 2.1 | 1.9 | 1.9 | 1.8 | 1.6 | 2.4 |
Debt to assets (%) | 51.6 | 47.9 | 46.3 | 42.9 | 38.5 | 57.3 |
Debt to equity (%) | 106.5 | 92.1 | 86.3 | 75.2 | 62.6 | 139.7 |
Times interest earned (X) | 3.6 | 4.1 | 5.0 | 6.7 | 8.5 | 10.1 |
Times burden covered (X) | 3.6 | 4.1 | 5.0 | 6.7 | 8.5 | 5.4 |
Debt to assets (market value, %) | 39.6 | 35.9 | 38.1 | 34.7 | 25.3 | 32.5 |
Debt to equity (market value, %) | 65.5 | 56.0 | 61.5 | 53.2 | 33.8 | 50.5 |
Current ratio (X) | 2.1 | 2.7 | 3.2 | 3.0 | 3.3 | 2.2 |
Acid test (X) | 0.8 | 1.1 | 1.3 | 1.2 | 1.4 | 1.5 |
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