You have been hired as an analyst for Metro Bank and your team is working on an independent assessment of Korsiney’s Food Inc. (KF Inc.) KF Inc. is a firm that specializes in the production of freshly imported farm products from France. Your assistant has provided you with the following data for Flipper Inc and their industry. Ratio 1999 1998 1997 1999- Industry Average Long-term debt 0.45 0.40 0.35 0.35 Inventory Turnover 62.65 42.42 32.25 53.25 Depreciation/Total Assets 0.25 0.014 0.018 0.015 Days’ sales in receivables 113 98 94 130.25 Debt to Equity 0.75 0.85 0.90 0.88 Profit Margin 0.082 0.07 0.06 0.075 Total Asset Turnover 0.54 0.65 0.70 0.40 Quick Ratio 1.028 1.03 1.029 1.031 Current Ratio 1.33 1.21 1.15 1.25 Times Interest Earned 0.9 4.375 4.45 4.65 Equity Multiplier 1.75 1.85 1.90 1.88 In the annual report to the shareholders, the CEO wrote, “1997 was a good year for the firm with respect to our ability to meet our short-term obligations. We had higher liquidity largely due to an increase in highly liquid current assets (cash, account receivables and short-term marketable securities).” Is the CEO correct? Explain and use only relevant information in your analysis.
You have been hired as an analyst for Metro Bank and your team is working on an independent assessment of Korsiney’s Food Inc. (KF Inc.) KF Inc. is a firm that specializes in the production of freshly imported farm products from France. Your assistant has provided you with the following data for Flipper Inc and their industry. Ratio 1999 1998 1997 1999- Industry Average Long-term debt 0.45 0.40 0.35 0.35 Inventory Turnover 62.65 42.42 32.25 53.25 Depreciation/Total Assets 0.25 0.014 0.018 0.015 Days’ sales in receivables 113 98 94 130.25 Debt to Equity 0.75 0.85 0.90 0.88 Profit Margin 0.082 0.07 0.06 0.075 Total Asset Turnover 0.54 0.65 0.70 0.40 Quick Ratio 1.028 1.03 1.029 1.031 Current Ratio 1.33 1.21 1.15 1.25 Times Interest Earned 0.9 4.375 4.45 4.65 Equity Multiplier 1.75 1.85 1.90 1.88 In the annual report to the shareholders, the CEO wrote, “1997 was a good year for the firm with respect to our ability to meet our short-term obligations. We had higher liquidity largely due to an increase in highly liquid current assets (cash, account receivables and short-term marketable securities).” Is the CEO correct? Explain and use only relevant information in your analysis.
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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PROJECT:
You have been hired as an analyst for Metro Bank and your team is working on an independent assessment of Korsiney’s Food Inc. (KF Inc.) KF Inc. is a firm that specializes in the production of freshly imported farm products from France. Your assistant has provided you with the following data for Flipper Inc and their industry.
Ratio |
1999 |
1998 |
1997 |
1999- Industry Average |
|
Long-term debt |
0.45 |
0.40 |
0.35 |
0.35 |
|
Inventory Turnover |
62.65 |
42.42 |
32.25 |
53.25 |
|
|
0.25 |
0.014 |
0.018 |
0.015 |
|
Days’ sales in receivables |
113 |
98 |
94 |
130.25 |
|
Debt to Equity |
0.75 |
0.85 |
0.90 |
0.88 |
|
Profit Margin |
0.082 |
0.07 |
0.06 |
0.075 |
|
Total Asset Turnover |
0.54 |
0.65 |
0.70 |
0.40 |
|
Quick Ratio |
1.028 |
1.03 |
1.029 |
1.031 |
|
Current Ratio |
1.33 |
1.21 |
1.15 |
1.25 |
|
Times Interest Earned |
0.9 |
4.375 |
4.45 |
4.65 |
|
Equity Multiplier |
1.75 |
1.85 |
1.90 |
1.88 |
- In the annual report to the shareholders, the CEO wrote, “1997 was a good year for the firm with respect to our ability to meet our short-term obligations. We had higher liquidity largely due to an increase in highly liquid current assets (cash, account receivables and short-term marketable securities).” Is the CEO correct? Explain and use only relevant information in your analysis.
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