UP Financial Performance Calculations Questions
UP Financial Performance Calculations Questions
Workbook Index Financial Calculations Financial Performance Summary Wk 4 Financial Performance Worksheet HCS/385 v4 Page 2 of 5 Use the Hillside, Inc. Balance Sheet information in cells A2 through D18 and cells A21 through B38 to complete th Table 1: Hillside, Inc. Balance Sheet ($ in Millions) ASSETS LIABILITIES Cash & Marketable Securities 449.90 Accounts Payable 1,611.20 Accounts Receivable 954.80 Salaries Payable 225.20 Inventories 3,645.20 Other Current Liabilities 1,118.80 Other Current Assets 116.60 Total Current Liabilities 2,955.20 Total Current Assets 5,165.27 Other Liabilities 693.40 Machinery & Equipment 1,688.90 Land 1,129.70 Total Liabilities 3,648.60 Buildings 2,348.40 Depreciation (575.60) SHAREHOLDER’S EQUITY Property, Plant & Equip. – Net 4,591.40 Common Stock 828.50 Other Long Term Assets 120.90 Retained Earnings 5,401.70 Total Long-Term Assets 4,712.30 Total Shareholder’s Equity 6,230.20 Total Assets 9,877.57 Total Liabilities & Equity Table 2: Hillside, Inc. Income Statement ($ in Millions) Revenue Cost Of Goods Sold Gross Profit 28,681.10 20,768.80 7,912.30 Operating Expenses: Selling, General & Admin. Depreciation Operating income 5,980.80 307.30 1,624.20 Interest Other Expense (Income) Income Before Taxes Income Taxes Net Income (13.10) 1,637.30 618.10 1,019.20 Number of Common Stock Shares Outstanding 1,032,271 Table 3: Financial Performance Calculations Liquidity Ratios Current Ratio (times) Quick Ratio (times) No data No data No data Answers Input the current ratio. Input the quick ratio. Copyright© 2020 by University of Phoenix. All rights reserved. 9,878.80 Wk 4 Financial Performance Worksheet HCS/385 v4 Page 3 of 5 Average Payment Period (days) No data Input the average payment period. Asset Management Ratios Total Asset Turnover (times) No data No data Input the total asset turnover. Average Collection Period (days) Inventory Turnover (times) No data No data Input the average collection period. Input the inventory turnover. Financial Leverage Ratios Total Debt to Total Assets Equity Multiplier (times) No data No data No data Input the debt to total assets. Input the equity multiplier. Profitability Ratios Operating Profit Margin Net Profit Margin Return on Total Assets Return on Equity Earnings per Share No data No data No data No data No data No data Input the operating profit margin. Input the net profit margin. Input the return on total assets. Input the return on equity. Input the earnings per share. Copyright© 2020 by University of Phoenix. All rights reserved. Wk 4 Financial Performance Worksheet HCS/385 v4 Page 4 of 5 h B38 to complete the Financial Performance Calculations in cells A40 through C60. Copyright© 2020 by University of Phoenix. All rights reserved. Financial Performance Summary: Provide a brief summary of your financial analysis from the Financial Calculations. Insert your summary. Liquidity ratios answer the question, How well is an organization positioned to meet its short-term obligations? Current ratio. Compares current assets to current liabilities, to see if a business has enough cash to pay its immediate liabilities. Current ratio (current assets/current liabilities) measures the firm’s solvency by indicating its ability to pay current debts from assets. Typically banks like to see at least 2.0. Quick ratio (current assets-inventory)/current liabilities) measures how the most liquid assets can be used to meet current debts. For a sound business, bankers want this to be above 1.0. Average Payment Period – able to pay all of its bills in a timely manner. The average payment period ratio {Current Liabilities / [(Total Operating Expenses – Depreciation and Amortization Expenses) / 365]} is the counterpart to the days in accounts receivable ratio. It is a measure of how long, on average, it takes an organization to pay its bills (Zelman et al., p. 158). Asset management (turnover) ratios compare the assets of a company to its sales revenue. … They indicate the ability of a company to translate its assets into the sales. Also known as Activity Ratios The total asset turnover ratio (Total Operating Revenues / Total Assets) measures the overall efficiency of the organization’s assets in producing revenue. It answers the question, For every dollar in assets, how many dollars of operating revenue are being generated? (Zelman, p. 172) The term average collection period can be used interchangeably with days in accounts receivable (Zelman, p. 156) Inventory turnover. Calculates the time it takes to sell off inventory. A low turnover figure indicates that a business has an excessive investment in inventory, and therefore is at risk of having obsolete inventory. Financial leverage ratios, sometimes called equity or debt ratios, measure the value of equity in a company by analyzing its overall debt picture. These ratios either compare debt or equity to assets Debt ratio or Total debt to total assets (total liabilities/total assets) measures the percentage of company assets financed by its creditors. The higher the ratio (1.0 would mean 100 percent of the assets are financed by debt), the greater the risk of default. Owners like this number to be high, but bankers want it to be moderate or low. The equity multiplier is a financial leverage ratio that measures the amount of a firm’s assets that are financed by its shareholders by comparing total assets with total shareholder’s equity. In other words, the equity multiplier shows the percentage of assets that are financed or owed by the shareholders. Revenue, expense, and profitability ratios answer two questions, How profitable is an organization? How effective is it in controlling its operating costs and increasing its operating revenues? Operating Profit Margin is a profitability or performance ratio that reflects the percentage of profit a company produces from its operations, prior to subtracting taxes and interest charges. Net profit margin is the percentage of revenue left after all expenses have been deducted from sales. The measurement reveals the amount of profit that a business can extract from its total sales. Calculates the proportion of net profit to sales; a low proportion can indicate a bloated cost structure or pricing pressure. Return on assets. Calculates the ability of management to efficiently use assets to generate profits. A low return indicates a bloated investment in assets. Return on Equity, or ROE, (net profit after taxes/stockholders’ equity) measures the return earned on the owners’ investment. Earnings Per Share Earnings per share (EPS) is calculated as a company’s profit divided by the outstanding shares of its common stock. a public company’s profit per outstanding share of stock, calculated on a quarterly or annual basis.
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