Saturn Computer is considering to expand, but before that, the management wants to know the financial position of the company compared to that of the industry. Data for Saturn Computer Co. and its industry averages follow. Items Amount ($) Items Amounts ($) Cash 87,500 Accounts Payable 110,000 Total Operating Expense 123,000 Interest Expense 26,500 Income Tax 18,200 Total Sales 1,607,500 Net Fixed Assets 292,500 Long-term Bank Loan 246,500 Cost of Goods Sold 1,352,500 Common Stock Equity 361,000 Inventories 211,500 Other Current Liabilities 84,000 Accounts Receivables 336,000 Notes Payable (Maturity within 1 year) 107,000 Total Operating Profit 110,000 Net Profit after tax 88,300 Industry Average Ratios Current ratio 2.8 Quick Ratio 1.8 Debt-to-Equity ratio 20% Total Assets Turnover 1.50 Times interest earned 9 Net Profit margin 6.50% Inventory turnover 10 Return on Total Assets 9% Financial Leverage 2.0 Return on Equity 19.50% Calculate the following ratios for Saturn: 1) Net Profit Margin, 2) Total Asset Turnover 3) Financial Leverage, 4) Return on Equity 5) Construct the DuPont equation of Saturn and the industry. Based on the DuPont equation constructed identify the area where Saturn needs to improve its performance.
Saturn Computer is considering to expand, but before that, the management wants to know the financial position of the company compared to that of the industry. Data for Saturn Computer Co. and its industry averages follow.
|
Items |
Amount ($) |
Items |
Amounts ($) |
|
Cash |
87,500 |
Accounts Payable |
110,000 |
|
Total Operating Expense |
123,000 |
Interest Expense |
26,500 |
|
Income Tax |
18,200 |
Total Sales |
1,607,500 |
|
Net Fixed Assets |
292,500 |
Long-term Bank Loan |
246,500 |
|
Cost of Goods Sold |
1,352,500 |
Common Stock Equity |
361,000 |
|
Inventories |
211,500 |
Other Current Liabilities |
84,000 |
|
Accounts Receivables |
336,000 |
Notes Payable (Maturity within 1 year) |
107,000 |
|
Total Operating Profit |
110,000 |
Net Profit after tax |
88,300 |
|
Industry Average Ratios |
|
|
Current ratio 2.8 |
Quick Ratio 1.8 |
|
Debt-to-Equity ratio 20% |
Total Assets Turnover 1.50 |
|
Times interest earned 9 |
Net Profit margin 6.50% |
|
Inventory turnover 10 |
|
|
Financial Leverage 2.0 |
|
Calculate the following ratios for Saturn: 1) Net Profit Margin, 2) Total Asset Turnover 3) Financial Leverage, 4) Return on Equity 5) Construct the DuPont equation of Saturn and the industry. Based on the DuPont equation constructed identify the area where Saturn needs to improve its performance.
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