A few years ago, I decided to expand my coffee shop business and bought a coffee roaster. I created my own brand, America’s famous, and started selling vacuum-packed coffee in local supermarkets. It was a huge success! Sales of my vacuum-packed coffee skyrocket and soon become the item most sold in my company. To be honest, I have concentrated on sales and no other items in the income statement or balance sheet. A finance intern from Kean University prepared the Table below. I am a little embarrassed to confess that I don’t know what most of the ratios mean. However, I noticed that some of the ratios are below the industry median, and I am anxious. Should I be worried? Is my business on the edge of being broke? What can you say about the financial performance of The America’s famous Co? Do you have any suggestions? The America’s famous Co. Industry Median Current ratio 0.74 1.43 Quick ratio 0.39 0.35 Cash ratio 0.15 0.21 Total asset turnover 2.01 0.85 Inventory turnover 27.96 6.15 Receivables turnover 54.91 9.82 Total debt ratio 0.43 0.52 Debt-equity ratio 0.74 1.08 Equity multiplier 1.74 2.08 Times interest earned 5.26 8.06 Cash coverage ratio 8.12 9.41 Profit margin 5.01% 5.10% Return on assets 10.08% 9.53% Return on equity 17.59% 15.14%
A few years ago, I decided to expand my coffee shop business and bought a coffee roaster. I created my own brand, America’s famous, and started selling vacuum-packed coffee in local supermarkets. It was a huge success! Sales of my vacuum-packed coffee skyrocket and soon become the item most sold in my company. To be honest, I have concentrated on sales and no other items in the income statement or balance sheet. A finance intern from Kean University prepared the Table below. I am a little embarrassed to confess that I don’t know what most of the ratios mean. However, I noticed that some of the ratios are below the industry median, and I am anxious. Should I be worried? Is my business on the edge of being broke? What can you say about the financial performance of The America’s famous Co? Do you have any suggestions? The America’s famous Co. Industry Median Current ratio 0.74 1.43 Quick ratio 0.39 0.35 Cash ratio 0.15 0.21 Total asset turnover 2.01 0.85 Inventory turnover 27.96 6.15 Receivables turnover 54.91 9.82 Total debt ratio 0.43 0.52 Debt-equity ratio 0.74 1.08 Equity multiplier 1.74 2.08 Times interest earned 5.26 8.06 Cash coverage ratio 8.12 9.41 Profit margin 5.01% 5.10% Return on assets 10.08% 9.53% Return on equity 17.59% 15.14%
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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A few years ago, I decided to expand my coffee shop business and bought a coffee roaster. I created my own brand, America’s famous, and started selling vacuum-packed coffee in local supermarkets. It was a huge success! Sales of my vacuum-packed coffee skyrocket and soon become the item most sold in my company. To be honest, I have concentrated on sales and no other items in the income statement or
Should I be worried? Is my business on the edge of being broke? What can you say about the financial performance of The America’s famous Co? Do you have any suggestions?
| The America’s famous Co. | Industry Median | |
| Current ratio | 0.74 | 1.43 |
| Quick ratio | 0.39 | 0.35 |
| Cash ratio | 0.15 | 0.21 |
| Total asset turnover | 2.01 | 0.85 |
| Inventory turnover | 27.96 | 6.15 |
| Receivables turnover | 54.91 | 9.82 |
| Total debt ratio | 0.43 | 0.52 |
| Debt-equity ratio | 0.74 | 1.08 |
| Equity multiplier | 1.74 | 2.08 |
| Times interest earned | 5.26 | 8.06 |
| Cash coverage ratio | 8.12 | 9.41 |
| Profit margin | 5.01% | 5.10% |
| 10.08% | 9.53% | |
| 17.59% | 15.14% |
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