preview

Financial Ratios and Division Managers

Decent Essays

P1-5 A) The front desk receptionist routinely takes an extra 20 minutes of lunch to run personal errands. Agency Problem: she took an extra 20 minutes to do her personal errands instead of working, which she puts her own self interests before the best interests of the company. Occurred cost: the salary that the company pays to her. The solution would depend on the boss on her work performance in the past. If she has an important personal errand to do during that time, then boss might need to talk to her and explain the solution for her. This problem can be final dealt by clocking-in and clocking-out even time for lunch hours. B) Division managers are padding cost estimates so as to show short-term efficiency gains when the …show more content…

|Ratio |Actual 2007 |Actual 2008 |Actual |Industry average | | | | |2009 |2009 | |Current ratio |1.7 |1.8 |2.48 |1.5 | |Quick ratio |1.0 |0.9 |1.35 |1.2 | |Inventory turnover (times) |5.2 |5.0 |5.29 |10.2 | |Average collection period |50.7 days |55.8 days |57.9 days |46 days | |Total asset turnover (time) |1.5 |1.5 |1.6 |2.0 | |Debt ratio |45.8% |54.3% |57% |24.5% | |Time interest earned ratio |2.2 |1.9 |1.6 |2.5 | |Gross profit margin |27.5% |28.0% |27.0% |26.0% | |Net profit margin |1.1% |1.0% |0.65%

Get Access