Write the given assignment.
Given is Ratio analysis worksheet.
NOTE: Retail Clothing Store, like most retailers, has a fiscal year end in late January/early February. The Biz Miner data uses calendar years. You will have to assume that the closest full year is the appropriate match between the two sets of data.
ALSO: Include the formulas you use to calculate ratios, don't just provide a number. If you provide the wrong number, I cannot figure out what you are doing wrong so as to advise you how to correct your errors.
AND FINALLY: Pay attention to how Biz Miner calculates its data. For example, in calculating inventory turnover, does Biz Miner average the inventory at the beginning and end of the year or just use the end of the year data? You must use the same methodology when calculating ratios for Retail Clothing Store.
1. Using the financial statements of Retail Clothing Store ("RCS"), calculate the following financial ratios for RCS for all years (where possible--data for certain ratios may be unavailable). Please prepare your calculations in Excel.
a. Liquidity Measures - entity's ability to meet its short-term financial obligations
i. Current ratio
ii. Quick ratio
b. Activity/Turnover ratios - operating efficiency for specific assets
i. Accounts receivable turnover
ii. Inventory turnover
iii. Sales to net working capital
c. Leverage Ratios - entity's ability to meet its long-term obligations
i. Total debt to total assets
ii. Long-term debt to total capital
iii. Equity to total capital
iv. Debt to equity
d. Coverage Ratios - entity ‘s ability to service its debt obligations
i. Times interest earned
e. Profitability and Return on Investment Ratios - entity's operational performance
i. Return on equity
ii. Net income to sales
iii. Gross profit margin
iv. Operating profit margin
2. Prepare an exhibit comparing Retail Clothing Store's financial ratios against industry performance. Use the following template. For industry data, please see BizMiner report.
|
Year
|
2006
|
2007
|
2008
|
|
|
Ratio
|
RCS
|
Industry
|
RCS
|
Industry
|
RCS
|
Industry
|
Comments:
|
|
Liquidity Measures
|
|
|
|
|
|
|
|
|
Current ratio
|
|
|
|
|
|
|
|
|
Quick ratio
|
|
|
|
|
|
|
|
|
Activity/Turnover Ratios
|
|
|
|
|
|
|
|
|
A/R/ turnover
|
|
|
|
|
|
|
|
|
Inventory turnover
|
|
|
|
|
|
|
|
|
Sales to net working capital
|
|
|
|
|
|
|
|
|
Leverage Ratios
|
|
|
|
|
|
|
|
|
Total debt to total assets
|
|
|
|
|
|
|
|
|
Long-term debt to total capital
|
|
|
|
|
|
|
|
|
Equity to total capital
|
|
|
|
|
|
|
|
|
Debt to equity
|
|
|
|
|
|
|
|
|
Coverage Ratios
|
|
|
|
|
|
|
|
|
Times interest earned
|
|
|
|
|
|
|
|
|
Profitability and ROI Ratios
|
|
|
|
|
|
|
|
|
Return on equity
|
|
|
|
|
|
|
|
|
Net income to sales
|
|
|
|
|
|
|
|
|
Gross profit margin
|
|
|
|
|
|
|
|
|
Operating profit margin
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Overall conclusion:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Attachment:- Ratio-template.rar