Module 6 Homework Assignment Use the information given in the green tabs to solve the questions below
| Module 6 | ||||||||||
| Homework Assignment | ||||||||||
| Use the information given in the green tabs to solve the questions below | ||||||||||
| (answers in yellow, and show formulas used when applicable.) | ||||||||||
| 1) | Calcluate the following profitablility ratios: | |||||||||
| 2010 | 2009 | Formulas | ||||||||
| a) | Percent return on net sales | |||||||||
| b) | Percent return on assets employed | |||||||||
| i) | What does the percent return on net sales indicate? | |||||||||
| ii) | What does the percent return on assets employed indicate? | |||||||||
| iii) | What does the change from 2009 to 2010 in the percent return on assets mean for the company? | |||||||||
| 2) | The CFO wants a projection for 2011 showing a net profit margin of 25%. | |||||||||
| What changes would have to happen for the net profit to increase? | ||||||||||
| 3) | What was the long term debt to equity ratio in 2009. | |||||||||
| 2009 | Formulas | |||||||||
| Ratio of Long Term Debt To Equity | ||||||||||
| What does this mean? | ||||||||||
| What is better a higher or lower ratio? | ||||||||||
| 4) | What are liquidity measures? | |||||||||
| Choose two ratios that assist in the determination of these measures. | ||||||||||
| (show the answers for both year as well as the formula) – (hint see page 360-361 of text) | ||||||||||
| 2010 | 2009 | Formulas | ||||||||
| Ratio #1 | ||||||||||
| Ratio #2 | ||||||||||
| 5) | What are debt service (coverage) ratios | |||||||||
| What is the formula to use | ||||||||||
| to determine debt service coverage | ||||||||||
| 6) | The two purple tabs show the breakdown of each division in this company. | |||||||||
| What types of items might you decide to “trend” based on the information shown. | ||||||||||
| (ie, if sales in one division declined from one year to the next, what kinds of trends might you want to | ||||||||||
| start paying attention to. — hint page 373 and 374) | ||||||||||
| 7) | Describe at least two things that could happen within this company that would make it necessary for | |||||||||
| the controller to dig into the numbers and provide a write up to management. | ||||||||||
| (for instance, the controller might notice that inventory has shrunk by over 50% what | ||||||||||
| might he look for in the numbers and what ratios might he use to check things before alerting management) | ||||||||||
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