PREPARATION OF RATIOS
Use Jane's Shoes' financial statements in Problem 12-80A and the following data to respond to the requirements below.
|
|
2009
|
2008
|
2007
|
|
Average number of common shares outstanding
|
77,063
|
76,602
|
76,067
|
|
Accounts receivable
|
$ 667,547
|
$ 596,018
|
$ 521,588
|
|
Inventories
|
592,986
|
471,202
|
586,594
|
|
Total assets
|
2,187,463
|
1,872,861
|
1,708,430
|
|
Shareholders' equity
|
1,646,026
|
1,324,149
|
1,032,789
|
|
Stock repurchases
|
930,111
|
581,134
|
288,320
|
|
Cash flows from operating activities
|
190,000
|
150,000
|
137,000
|
|
Common dividends paid
|
57,797
|
45,195
|
39,555
|
|
Dividends per common share
|
0.75
|
0.59
|
0.52
|
|
Market price per share:
|
|
|
|
|
High
|
90.25
|
77.45
|
54.50
|
|
Low
|
55.00
|
35.12
|
26.00
|
|
Close
|
86.33
|
71.65
|
43.22
|
|
Year Ended December 31,
|
|
Industry Averages
|
2009
|
2008
|
|
|
Return on equity
|
25.98%
|
23.04%
|
|
|
Profit margin
|
0.05
|
0.04
|
|
|
Asset turnover
|
2.24
|
2.56
|
|
|
Leverage
|
2.32
|
2.25
|
|
Required:
1. Prepare all the financial ratios for Jane's Shoes for 2009 and 2008.
2. Explain whether Jane's Shoes' short-term liquidity is adequate.
3. Discuss whether Jane's Shoes uses their assets efficiently.
4. Determine whether Jane's Shoes is profitable.
5. Discuss whether long-term creditors should regard Jane's Shoes as a high-risk or a low-risk firm.
6. Perform Dupont analysis for 2008 and 2009.