FIN 210 MIDTERM EXAM

ANSWER SHEET: RATIO ANALYSIS

NAME: Alexandrine Nicole P. Abando
 Requirement 1 Requirement 2

Year 2 Ratios Computation Overall Interpretation

(round off to 2 (Year 2 Ratios)
decimal places)  Rate the overall credit worthiness of TRI
15 points; 3 points each  Rating scale: 1 to 4 (4 being the highest rating for credit
15 points; 3 points worthiness)
each  Explain your credit rating for TRI based on the financial ratios
(i.e. trend from Year 0 to Year 2 and industry average)

20 points

Hint: Use Year 2 figures only in the Balance Sheet

(Total of Current Assets / Total Current Liabilities) Type/write your answer here.
Current ratio 1.57
9 900 The current ratio measures the firm's ability to pay off
= 1.57 short-term debt by evaluating overall short-term liquidity.
6 300 The quick ratio is also a measure of short-term liquidity. It
is, however, a more immediate liquidity metric than the
4 100 current ratio and is an indicative of a company's ability to
Acid-test ratio
0.65 = 0.65 pay off all of its short-term debts using cash or near-cash
6 300 assets. The quick ratio, when compared to the current
ratio, reflects the amount of inventory in the company's
current assets. Inventory turnover is the number of times a
firm sells its average inventory level in a given year. A low
Times interest 7 960 inventory turnover rate may indicate an inventory
earned 8.84 = 8.84 imbalance or expired products. A profitability ratio is return
900
on equity. It assesses the company's performance in
creating money for the benefit of its stockholders by
measuring the return on stockholder investment
Debt to
0.95 8 300
equity ratio = 0.95
8 700

Hint: Use Year 2 Cost of Goods Sold (COGS); Use Year 1 and
Year 2 Inventory balance to solve the average inventory)

Inventory 17 000
turnover 3.14 = 3.14
(5 400 + 5 800) ÷ 2