The financial statements and industry norms are shown below for Pamplin, Inc.
Given the below:
a. How liquid is the firm?
b. Are its managers generating an adequate operating profit on the firm%u2019s assets?
c. How is the firm financing its assets?
d. Are its managers generating a good return on equity?
2012 2013
Current ratio 6 4
Times interest earned 5 5.625
Inventory turnover 1.27 1.36
Total asset turnover .5 .55
Operating profit margin .20 .24
Operating return on assets .10 .13
Debt ratio .33 .34
Average collection period
$450 / $1020 = .44 $425 / $1232.5 = .34
$450/ ($1020/365) $425 / ($1232.5/365)
$450/2.79 = 161.29 $425/3.37 = 126.11
Fixed-asset turnover 1 1.03
Return on Equity .075 .104