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  • FMC Case Study: Key Financial Ratios in 2012 and 2011

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    John Verlie EMps
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    FMC's current ratio improved from 2012 to 2011, increasing from 5.34 to 5. The acid-test ratio also improved, rising from 2.6 to 2.7. Inventory turnover increased from 1.46 to 1.22, while receivable turnover grew from 3.3 to 2.8. As a result, the average collection period decreased from 110.6 days to 130.4 days. The debt ratio declined from 32.80% to 34.70%. Times interest earned increased from 5.5X to 6X. Total assets turnover, fixed assets turnover, operating profit margin, net profit margin, and return on assets all improved from 2012 to 2011.

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    Answer key to case study in Financial Management

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    Solution to FMC Case Study

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    FMC's current ratio improved from 2012 to 2011, increasing from 5.34 to 5. The acid-test ratio also improved, rising from 2.6 to 2.7. Inventory turnover increased from 1.46 to 1.22, while receivable turnover grew from 3.3 to 2.8. As a result, the average collection period decreased from 110.6 days to 130.4 days. The debt ratio declined from 32.80% to 34.70%. Times interest earned increased from 5.5X to 6X. Total assets turnover, fixed assets turnover, operating profit margin, net profit margin, and return on assets all improved from 2012 to 2011.

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    12 views3 pages

    FMC Case Study: Key Financial Ratios in 2012 and 2011

    Uploaded by

    John Verlie EMps
    FMC's current ratio improved from 2012 to 2011, increasing from 5.34 to 5. The acid-test ratio also improved, rising from 2.6 to 2.7. Inventory turnover increased from 1.46 to 1.22, while receivable turnover grew from 3.3 to 2.8. As a result, the average collection period decreased from 110.6 days to 130.4 days. The debt ratio declined from 32.80% to 34.70%. Times interest earned increased from 5.5X to 6X. Total assets turnover, fixed assets turnover, operating profit margin, net profit margin, and return on assets all improved from 2012 to 2011.

    Copyright:

    © All Rights Reserved
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    of 3

    FMC Case Study:

    2012 2011

    Current Assets Current Assets


    Current Ratio
    Current Liabilities Current Liabilities

    1230 1250
    230 250

    Current Ratio 5.34 5

    Current Assets-Inventory Current Assets-Inventory


    Acid-test Ratio
    Current Liabilities Current Liabilities

    1230-625 1250-575
    230 250

    Acid-test Ratio 2.6 2.7

    Cost of Sales Cost of Sales


    Inventory turn-over
    Average Inventory Inventory

    875 700
    575+625/2 575

    1.46 1.22

    Sales Sales
    Receivable Turnover
    Average receivable Receivable

    1450 1250
    450+430/2 450

    3.3 2.8

    365 days 365 days


    Average Collection period
    receivable Turnover receivable Turnover

    365 days 365 days


    3.3 2.8

    110.6 days 130.4 days


    Total Liabilities Total Liabilities
    Debt Ratio
    Total assets Total assets

    830 850
    2530 2450

    32.80% 34.70%

    Net Operating Income (IBIT) Net Operating Income (IBIT)


    Times Interest Earned
    Interest Expense Interest Expense

    330 300
    60 50

    5.5X 6X

    sales sales
    Total Assets Turnover
    Ave. total Assets Total Assets

    1450 1250
    2450+2530/2 2450

    .58X .51X

    sales sales
    Fixed Assets Turnover
    Ave. Net PPE Net PPE

    1450 1250
    1200+1300/2 1200

    1.16X 1.04X

    Net Operating Income Net Operating Income


    Operating Profit Margin
    sales sales

    330 300
    1450 1250

    22.80% 24%

    Net Income Net Income


    Net Profit Margin
    sales sales

    162 150
    1450 1250

    11% 12%

    Net Income Net Income


    Return on Assets
    Ave. total Assets Total Assets

    162 150
    2450+2530/2 2450

    6.5% 6.1%

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