Assignment Worksheet
1. Read the closing case "Ratios and Financial Planning at East Coast Yachts" in chapter 3 of your textbook.
2. Based on the information provided, answer the questions below:
Part I:
A. Calculate the following ratios for East Coast Yachts and compare them to those for the industry:
| |
East Coast Yachts |
Lower Quartile |
Median |
Upper Quartile |
Positive, Negative, or Neutral Relative to Industry |
| Current Ratio |
|
0.86 |
1.51 |
1.97 |
|
| Quick Ratio |
|
0.43 |
0.75 |
1.01 |
|
Asset Management or Turnover Ratios
Calculate and compare to industry ratios:
|
East Coast Yachts
|
Lower Quartile
|
Median
|
Upper Quartile
|
Positive, Negative, or Neutral Relative to Industry
|
|
Assets Turnover
|
|
1.1
|
1.27
|
1.46
|
|
|
Inventory Turnover
|
|
12.18
|
14.38
|
16.43
|
|
|
Receivables Turnover
|
|
10.25
|
17.65
|
22.43
|
|
Long-Term Solvency Ratios
Calculate and compare to industry ratios:
|
|
East Coast Yachts
|
Lower Quartile
|
Median
|
Upper Quartile
|
Positive, Negative, or Neutral Relative to Industry
|
|
Debt Ratio
|
|
0.32
|
0.47
|
0.61
|
|
|
Debt-Equity Ratio
|
|
0.51
|
0.83
|
1.03
|
|
|
Equity Multiplier
|
|
1.51
|
1.83
|
2.03
|
|
|
Interest Coverage
|
|
5.72
|
8.21
|
10.83
|
|
Profitability Measures
Calculate and compare to industry ratios:
|
|
East Coast Yachts
|
Lower Quartile
|
Median
|
Upper Quartile
|
Positive, Negative, or Neutral Relative to Industry
|
|
Profit Margin
|
|
5.02%
|
7.48%
|
9.05%
|
|
|
Return on Assets
|
|
7.05%
|
10.67%
|
14.16%
|
|
|
Return on Equity
|
|
9.06%
|
14.32%
|
20.83%
|
|
B. Based on your calculations and comparisons above, how would you characterize East Coast Yacht's performance relative to its industry?
Part II: Please answer the following questions:
Assuming East Coast Yachts maintains a constant retention ratio,
i. Calculate the firm's internal growth rate: ________
ii. In words, what does this rate mean?
iii. Calculate the firm's sustainable growth rate: ________
iv. In words, what does this rate mean?
Attachment:- Ratios and Financial Planning at East Coast Yachts.pdf