1. Clovis Industries had sales in 2010 of $40 million, 20 percent of which were cash. If Clovis normally carries 45 days of credit sales in accounts receivable, what are its average accounts receivable balances? (Assume a 365-day year.)
2. Williams Oil Company had a return on stockholders' equity of 18 percent during 2010. Its total asset turnover was 1.0 times, and its equity multiplier was 2.0 times. Calculate the company's net profit margin.
3. Using the data in the following table for a number of firms in the same industry, do the following:
a. Compute the total asset turnover, the net profit margin, the equity multiplier, and the return on equity for each firm.
b. Evaluate each firm's performance by comparing the firms with one another. Which firm or firms appear to be having problems? What corrective action would you suggest the poorer performing firms take? Finally, what additional data would you want to have on hand when conducting your analyses?
Firm
|
(in Millions of Dollars)
|
A
|
B
|
C
|
D
|
|
Sales
|
$20
|
$10
|
$15
|
$25
|
|
Net income after tax
|
3
|
0.5
|
2.25
|
3
|
|
Total assets
|
15
|
7.5
|
15
|
24
|
|
Stockholders' equity
|
10
|
5.0
|
14
|
10
|