TABLE 3-2 MicroDrive Inc.: Summary of Financial Ratios (Millions of Dollars)

TABLE 3-2 MicroDrive Inc.: Summary of Financial Ratios (Millions of Dollars)

RATIO FORMULA CALCULATION RATIO INDUSTRY AVERAGE COMMENT
Liquidity Current  assetsCurrent  liabilities $1,000$310  = 3.2 4.2 Poor
Quick Current  assets − InventoriesCurrent  liabilities $385$310  = 1.2 2.1 Poor
Asset Management          
Inventory turnover SalesInventories $3,000$615  = 4.9 9.0 Poor
Days sales outstanding (DSO) ReceivablesAnnual  sales / 365 $375$8.219  = 45.6 36.0 Poor
Fixed assets turnover SalesNet  fixed  assets $3,000$1,000  = 3.0 3.0 OK
Total assets turnover SalesTotal  assets $3,000$2,000  = 1.5 1.8 Poor
Debt Management          
Debt ratio Total  liabilitiesTotal  assets $1,064$2,000  = 53.2% 40.0% High (risky)
Times-interest-earned (TIE) Earnings  before  interest  and  taxes ( EBIT )Interest  charges $283.8$88  = 3.2 6.0 Low (risky)
EBITDA coverage EBITDA + Lease  pmts .Interest + Principal  payments + Lease  pmts . $411.8$136  = 3.0 4.3 Low (risky)
Profitability          
Profit margin on sales Net  income  available  to  common  stockholdersSales $113.5$3,000  = 3.8% 5.0% Poor
Basic earning power (BEP) Earnings  before  interest  and  taxes ( EBIT )Total  assets $283.8$2,000  = 14.2% 17.2% Poor
Return on total assets (ROA) Net  income  available  to  common  stockholdersTotal  assets $113.5$2,000  = 5.7% 9.0% Poor
Return on common equity (ROE) Net  income  available  to  common  stockholdersCommon  equity $113.5$896  = 12.7% 15.0% Poor
Market Value          
Price/earnings (P/E) Price  per  shareEarnings  per  share $23.00$2.27  = 10.1 12.5 Low
Price/cash flow Price  per  shareCash  flow  per  share $23.00$4.27  = 5.4 6.8 Low
Market/book (M/B) Market  price  per  shareBook  value  per  share $23.00$1
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