Assessing a Firm’s Future Financial Health

Case Study Answer Sheet

Profitability Ratios:

income statement

1. 1,307 | 48,769 | 2.68%

2. decrease | 3.60%
3. increase | increase | income tax paid
4. 15,249 | 1,824 | 11.96% | decrease | 14.67%
5. 12,193 | 1,307 | 10.72% | deterioration | 15.22%

Activity Ratios:

1. 48,769 | 22,780 | deteriorated | 2.17 | 2.14

2. 7,380 | 133.614 | 55.23 | improvement | 58.68
3. 8,220 | 29,700 | 3.61 | deterioration | 4.76
4. 5,160 | 48,769 | 9.45 | improvement | 7.98
5. net profit margin | return on invested capital | return on equity
total asset turnover | average collection period | inventory turnover ratio | fixed
asset turnover ratio
6. less efficient use of inventory | less efficient use of total assets | increase in
COGS as a percentage of sales | increase in operating expenses as a
percentage of sales

Leverage Ratios:

1. 10,587 | 46.47% | decrease | 48.55%

2. 42.58%
3. 2,528 | 517 | 4.89 | deterioration | 7.12
4. 2,820 | 9.49% | increase | 8.42% | less
5. equity growing faster than net income | increased expenses (COGS and
operating) as a percentage of revenues
6. increased

Liquidity Ratios:

1. 17,620 | 7,531 | 2.34 | deterioration | 2.41

2. 1.25 | deterioration | 1.52

Unidentified Industries:

A. Aerospace manufacturer
B. Electric utility
C. Supermarket chain
D. Japanese trading company
E. Automobile manufacturer