An Accounting Case Study

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An Accounting Case Study

Required:
a). Using Nautica’s financial statements, calculate the 17 ratios presented in the chapter for the last year presented. The last year is the year-ended march 2, 2002.

Profitability ratios

1)      Gross profit margin ratio = gross profit/ net sales = 284,415/ 692,092 = 0.4109 = 41.09%

2)      Net profit margin ratio = net income/ net sales = 17,259/ 692,092 = 0.0249 = 2.49%

3)      Rate of return on assets ratio = net income/ average total assets = 17,259/{(422,070+378,306)/2} = 17,259/ 400,188 = 0.0431 = 4.31%

4)      Rate of return on common equity ratio = (net income- preferred dividend)/ average common stock holder’s equity = (17,259 – 20,000)/ {(4,472+4,333)/2}= -2,741/4,402.5 = 0.623 = 6.23%

5)      Dividend payout ratio = cash dividends/ net income = 4,260/17,259 = 0.2468 = 24.68%

6)      Earnings per share = (net income – preferred dividend)/ average common shares outstanding= basic= 0.52 and diluted= 0.50

7)      Price to earnings ratio = average market price per share/ earnings per share = {(14.49+12.57)/2}/0.52 = 26.02 times

Efficiency ratios

8)      Asset turnover ratio = net sales/ average total assets = 692,092/400,188 = 1.73 times

9)      Receivables turnover = net sales/ average accounts receivable = 692,092/{(89,736+105,269)/2} = 7.10 times

10)  Inventory turnover ratio = costs of goods sold/ average inventory = 407,677/ {(66,443+98,021)/2} = 4.96 times

Liquidity ratios

11)  Current ratio = current assets/ current liabilities = 235,696/ 84,482= 2.79

12)  Quick ratio = (cash + short term investments + current receivables)/ current liabilities = 141,900/ 84,482= 1.68

13)  Operating cash flow to current debt ratio = cash provided by operating activities/ average current liabilities = 91,148/ 88,762 = 1.03

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