The selected information below has been taken from the last two annual reports of Rasheed Company.
|
2005 |
2004 |
|
|
Accounts receivable |
$1,466 |
$1,330 |
|
Merchandise inventory |
2,093 |
1,947 |
|
Total assets |
13,707 |
12,829 |
|
Total stockholders’ equity |
4,386 |
4,180 |
|
Sales revenue |
14,472 |
13,971 |
|
Cost of goods sold |
11,481 |
11,606 |
|
Operating income |
1,636 |
1,509 |
|
Net income |
1,170 |
1,020 |
|
Interest expense |
1,000 |
900 |
|
Fixed assets |
8,000 |
7,500 |
a. Compute each of the following ratios for both years.
1. Inventory turnover
2. Accounts receivable turnover
3. Gross profit margin
4. Operating profit margin
5. Profit margin
6. Asset turnover
7. Return on assets
8. Return on equity
9. Times interest earned
10. Day’s sales in inventory
11. Average accounts receivable collection period
12. Fixed asset turnover
b. Has the company’s financial performance improved or deteriorated during the most recent year? Was the firm more effective, more efficient, both, or neither? Which factors contributed to the improvement? Did any factors hurt overall performance? Explain.