Problem

Basic Ratio AnalysisMedtronics is a world leader in medical technology. The following sele...

Basic Ratio Analysis

Medtronics is a world leader in medical technology. The following selected data are adapted from a recent annual report. (Dollar amounts are stated in millions.)

 

Beginning of the Year

End of the Year

Total current assets

$ 9,150

$ 9,515

Total current liabilities

4,726

5,857

Total assets

30,675

33,083

Total stockholders’ equity

15,968

17,113

Operating income

 

4,145

Net income

 

3,617

The company has long-term liabilities that bear interest at annual rates ranging from 6 percent to 8 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 Medtronic ’s management is utilizing the company’s resources in a reasonably efficient manner? Explain.

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