Use the information given in the green tabs to solve the questions below

  (answers in yellow, and show formulas used when applicable.)

1)

Calcluate the following profitablility ratios:

2010

2009

Formulas

   a)

Percent return on net sales

   b)

Percent return on assets employed

             i)

What does the percent return on net sales indicate?

            ii)

What does the percent return on assets employed indicate?

           iii)

What does the change from 2009 to 2010 in the percent return on assets mean for the company?

2)

The CFO wants a projection for 2011 showing a net profit margin of 25%.

What changes would have to happen for the net profit to increase?

3)

What was the long term debt to equity ratio in  2009.  

2009

Formulas

Ratio of Long Term Debt To Equity

What does this mean? 

What is better a higher or lower ratio?

4)

What are liquidity measures?

Choose two ratios that assist in the determination of these measures.

(show the answers for both year as well as the formula) – (hint see page 360-361 of text)

2010

2009

Formulas

Ratio #1

Ratio #2

5)

What are debt service (coverage)  ratios

What is the formula to use

to determine debt service coverage

6)

The two purple tabs show the breakdown of each division in this company.

What types of items might you decide to “trend” based on the information shown.

(ie, if sales in one division declined from one year to the next, what kinds of trends might you want to

start paying attention to. — hint page 373 and 374)

7)

Describe at least two things that could happen within this company that would make it necessary for

the controller to dig into the numbers and provide a write up to management.

(for instance, the controller might notice that inventory has shrunk by over 50% what

might he look for in the numbers and what ratios might he use to check things before alerting management)