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Assignment - Ratios
Assignment - Ratios
has applied for a loan from the Trust Us Bank in order to invest in several
potential opportunities. In order to evaluate the firm as a potential debtor, the bank would
like to compare Baker & Co. to the industry. The following are the financial statements
given to Trust Us Bank:
Income Statement
Sales (100% credit) 1,330
Cost of goods sold 760
Gross profit 570
Operating expenses 30
Depreciation 200
Net operating income 340
Interest expense 57
Net income before taxes 283
Taxes 96
Net income 187
Industry Norms
Current ratio 5.0
Quick ratio 3.0
Inventory turnover 2.2
Average collection period 90 days
Debt ratio .33
Times interest earned 7.0
Total asset turnover .75
Fixed asset turnover 1.0
Net profit margin 12%
Return on total assets 9.00%
Return on equity 10.43%
Required: Prepare a report to the Trust Us Bank about the firm performance.