91Ó°ÊÓ

Ratio analysis is a fundamental approach to assessing a company's health by examining the relationships between key financial indicators. According to many analysts, ratio analysis is the most critical aspect of the analytical process.

2018

$\begin{array}{c}\mathrm{Current}\text{ }\mathrm{ratio}=\frac{\mathrm{Total}\text{ }\mathrm{current}\text{ }\mathrm{asset}}{\mathrm{Total}\text{ }\mathrm{current}\text{ }\mathrm{liabilities}}\\ =\frac{\mathrm{\$}365,000}{\mathrm{\$}222,000}\\ =1.64\end{array}$

2017

$\begin{array}{c}\mathrm{Current}\text{ }\mathrm{ratio}=\frac{\mathrm{Total}\text{ }\mathrm{current}\text{ }\mathrm{asset}}{\mathrm{Total}\text{ }\mathrm{current}\text{ }\mathrm{liabilities}}\\ =\frac{\mathrm{\$}383,000}{\mathrm{\$}244,000}\\ =1.57\end{array}$

2018

$\begin{array}{c}\mathrm{Cash}\text{ }\mathrm{ratio}=\frac{\mathrm{Cash}+\mathrm{Cash}\text{ }\mathrm{equivalent}}{\mathrm{Total}\text{ }\mathrm{current}\text{ }\mathrm{liabilities}}\\ =\frac{\mathrm{\$}99,000+\mathrm{\$}0}{\mathrm{\$}222,000}\\ =0.45\end{array}$
2017

$\begin{array}{c}\mathrm{Cash}\text{ }\mathrm{ratio}=\frac{\mathrm{Cash}+\mathrm{Cash}\text{ }\mathrm{equivalent}}{\mathrm{Total}\text{ }\mathrm{current}\text{ }\mathrm{liabilities}}\\ =\frac{\mathrm{\$}97,000+\mathrm{\$}0}{\mathrm{\$}244,000}\\ =0.39\end{array}$

c)Times interest earned ratio

2018

$\begin{array}{c}\mathrm{Times}\text{ }\mathrm{interest}\text{ }\mathrm{earned}\text{ }\mathrm{ratio}=\frac{\mathrm{Net}\text{ }\mathrm{Income}+\mathrm{Income}\text{ }\mathrm{tax}\text{ }\mathrm{expense}+\mathrm{Interest}\text{​â¶Ä„}\mathrm{expense}}{\mathrm{Interest}\text{ }\mathrm{expense}}\\ =\frac{\mathrm{\$}65,000+\mathrm{\$}18,000+\mathrm{\$}8,000}{\mathrm{\$}8,000}\\ =11.38\end{array}$

2017

$\begin{array}{c}\mathrm{Times}\text{ }\mathrm{interest}\text{ }\mathrm{earned}\text{ }\mathrm{ratio}=\frac{\mathrm{Net}\text{ }\mathrm{Income}+\mathrm{Income}\text{ }\mathrm{tax}\text{ }\mathrm{expense}+\mathrm{Interest}\text{​â¶Ä„}\mathrm{expense}}{\mathrm{Interest}\text{ }\mathrm{expense}}\\ =\frac{\mathrm{\$}50,000+\mathrm{\$}22,000+\mathrm{\$}12,000}{\mathrm{\$}12,000}\\ =7.00\end{array}$

2018

$\begin{array}{c}\mathrm{Inventory}\text{ }\mathrm{turnover}\text{ }\mathrm{ratio}=\frac{\mathrm{Cost}\text{ }\mathrm{of}\text{ }\mathrm{goods}\text{ }\mathrm{sold}}{\mathrm{Average}\text{ }\mathrm{merchandise}\text{ }\mathrm{Inventory}}\\ =\frac{\mathrm{\$}236,000}{\left(\frac{\mathrm{\$}142,000+\mathrm{\$}164,000}{2}\right)}\\ =1.54\end{array}$

2017

$\begin{array}{c}\mathrm{Inventory}\text{ }\mathrm{turnover}\text{ }\mathrm{ratio}=\frac{\mathrm{Cost}\text{ }\mathrm{of}\text{ }\mathrm{goods}\text{ }\mathrm{sold}}{\mathrm{Average}\text{ }\mathrm{merchandise}\text{ }\mathrm{Inventory}}\\ =\frac{\mathrm{\$}213,000}{\left(\frac{\mathrm{\$}164,000+\mathrm{\$}207,000}{2}\right)}\\ =1.15\end{array}$

2018

$\begin{array}{c}\mathrm{Gross}\mathrm{profit}\mathrm{percentage}=\frac{\mathrm{Gross}\text{ }\mathrm{profit}}{\mathrm{Net}\text{ }\mathrm{sales}\text{ }\mathrm{revenue}}\\ =\frac{\mathrm{\$}226,000}{\mathrm{\$}462,000}\\ =48.9\mathrm{\%}\end{array}$

2017

$\begin{array}{c}\mathrm{Gross}\mathrm{profit}\mathrm{percentage}=\frac{\mathrm{Gross}\text{ }\mathrm{profit}}{\mathrm{Net}\text{ }\mathrm{sales}\text{ }\mathrm{revenue}}\\ =\frac{\mathrm{\$}217,000}{\mathrm{\$}430,000}\\ =50.5\mathrm{\%}\end{array}$

2018

$\begin{array}{c}\mathrm{Debt}\mathrm{to}\mathrm{equity}\mathrm{ratio}=\frac{\mathrm{Total}\text{ }\mathrm{liabilities}}{\mathrm{Total}\text{ }\mathrm{equity}}\\ =\frac{\mathrm{\$}335,000}{\mathrm{\$}245,000}\\ =1.37\end{array}$

2017

$\begin{array}{c}\mathrm{Debt}\mathrm{to}\mathrm{equity}\mathrm{ratio}=\frac{\mathrm{Total}\text{ }\mathrm{liabilities}}{\mathrm{Total}\text{ }\mathrm{equity}}\\ =\frac{\mathrm{\$}336,000}{\mathrm{\$}224,000}\\ =1.50\end{array}$

2018

$\begin{array}{c}\mathrm{Return}\mathrm{on}\mathrm{common}\mathrm{stockholder}\text{'}\mathrm{s}\mathrm{equity}=\frac{\mathrm{Net}\text{ }\mathrm{income}−\mathrm{Preferred}\text{ }\mathrm{dividends}}{\mathrm{Average}\text{ }\mathrm{common}\text{ }\mathrm{stockholder}\text{'}\mathrm{s}\text{ }\mathrm{equity}}\\ =\frac{\mathrm{\$}65,000−\left(4\mathrm{\%}×\mathrm{\$}92,000\right)}{\left(\frac{\mathrm{\$}153,000+\mathrm{\$}132,000}{2}\right)}\\ =\frac{\mathrm{\$}65,000−\mathrm{\$}3,680}{142,500}\\ =43\mathrm{\%}\end{array}$

2017

$\begin{array}{c}\text{ }\mathrm{Return}\text{ }\mathrm{on}\text{ }\mathrm{common}\text{ }\mathrm{stockholder}\text{'}\mathrm{s}\text{ }\mathrm{equity}=\frac{\mathrm{Net}\text{ }\mathrm{income}−\mathrm{Preferred}\text{ }\mathrm{dividends}}{\mathrm{Average}\text{ }\mathrm{common}\text{ }\mathrm{stockholder}\text{'}\mathrm{s}\text{ }\mathrm{equity}}\\ =\frac{\mathrm{\$}50,000−\left(4\mathrm{\%}×\mathrm{\$}92,000\right)}{\left(\frac{\mathrm{\$}132,000+\mathrm{\$}85,000}{2}\right)}\\ =\frac{\mathrm{\$}50,000−\mathrm{\$}3,680}{\mathrm{\$}108,500}\\ =42.7\mathrm{\%}\end{array}$

2018

$\begin{array}{c}\mathrm{Earning}\mathrm{per}\mathrm{share}\mathrm{of}\mathrm{common}\mathrm{stock}=\frac{\mathrm{Net}\text{ }\mathrm{income}−\mathrm{Preferred}\text{ }\mathrm{dividend}}{\mathrm{Weighted}\text{ }\mathrm{average}\text{ }\mathrm{number}\text{ }\mathrm{of}\text{ }\mathrm{common}\text{ }\mathrm{share}\text{ }\mathrm{of}\text{ }\mathrm{common}\text{ }\mathrm{stock}}\\ =\frac{\mathrm{\$}65,000−\mathrm{\$}3,860}{\left(\frac{16,000+15,000}{2}\right)}\\ =\mathrm{\$}3.96\end{array}$

2017

$\begin{array}{c}\mathrm{Earning}\mathrm{per}\mathrm{share}\mathrm{of}\mathrm{common}\mathrm{stock}=\frac{\mathrm{Net}\text{ }\mathrm{income}−\mathrm{Preferred}\text{ }\mathrm{dividend}}{\mathrm{Weighted}\text{ }\mathrm{average}\text{ }\mathrm{number}\text{ }\mathrm{of}\text{ }\mathrm{common}\text{ }\mathrm{share}\text{ }\mathrm{of}\text{ }\mathrm{common}\text{ }\mathrm{stock}}\\ =\frac{\mathrm{\$}50,000−\mathrm{\$}3,860}{15,000}\\ =\mathrm{\$}3.09\end{array}$

2018

$\begin{array}{c}\mathrm{Price}/\mathrm{Earning}\text{ }\mathrm{ratio}=\frac{\mathrm{Market}\text{ }\mathrm{price}\text{ }\mathrm{per}\text{ }\mathrm{share}\text{ }\mathrm{of}\text{ }\mathrm{common}\text{ }\mathrm{stock}}{\mathrm{Earnings}\text{ }\mathrm{per}\text{ }\mathrm{share}}\\ =\frac{\mathrm{\$}51.48}{\mathrm{\$}3.96}\\ =13.0\end{array}$

2017

$\begin{array}{c}\mathrm{Price}/\mathrm{Earning}\text{ }\mathrm{ratio}=\frac{\mathrm{Market}\text{ }\mathrm{price}\text{ }\mathrm{per}\text{ }\mathrm{share}\text{ }\mathrm{of}\text{ }\mathrm{common}\text{ }\mathrm{stock}}{\mathrm{Earnings}\text{ }\mathrm{per}\text{ }\mathrm{share}}\\ =\frac{\mathrm{\$}37.08}{\mathrm{\$}3.09}\\ =12.0\end{array}$

1. Compared to 2017, Sanfield is better positioned to pay off the debt in 2018. The times-interest-earned ratio, cash ratio, and current ratio all increased. The company's capacity to sell inventory increased as the inventory turnover improved.
2. 2018 has seen an improvement in Sanfield's stock's appeal. The earnings per share and price/earnings ratio increased with the rate of return on common stockholders' equity.