RATIO ANALYSIS- Practice Exercise

Problem 1: (PROVIDE SOLUTION)

Problem 2: (PROVIDE SOLUTIONS)
Problem 3: (PROVIDE SOLUTIONS)
Under Requirement “a”, Compute first these ratios for both Jones Corp and Smith Corp and
compare the two Corps and answer which one would be better to buy a stock.
Jones Corp. Smith Corp.
Profit margin 7.40% 5.25%
Return on assets 18.50% 12%
Return on equity 28.91% 34.43%
Receivable turnover 15.63% 14.29%
Average collection period 23.03 days 25.19 days
Inventory turnover 25 times 13.33 times
Fixed asset turnover 3.57 times 4 times
Total asset turnover 2.5 times 2.29times
Current ratio 1.50 times 2.5 times
Quick ratio 1 times 1.5 times
Debt to total assets 36% 65.14%

Times interest earned 24.13 times 6 times

Fixed charge coverage 13.33 times 4.75 times