Indicate the meaning of the ratios computed, is the business performing good or bad? RATIOS20212020201920182017Key RatiosDebt-to-Equity RatioDebt Ratio15.277436.4745 -118.43527.13355.20630.93500.96820.99770.87430.8372Long-term debt to EquityNon-current assets to Net worthCapitalization ratioCurrent liability ratio8.110419.8482 -70.69434.07143.200110.571725.9883 -80.34185.55984.59960.89020.95201.01430.80280.76190.46910.45580.40310.42930.3853Liquidity RaioCurrent ratioQuick ratio (acid-test ratio)0.80480.70280.80360.84890.80690.74200.64030.72240.79050.7404Cash ratio0.26230.17730.21520.35150.3002

While the ideal debt-to-equity ratio varies by sector, the general consensus is that it does not…

RATIOS 2021 2020 2019 2018 2017 Key Ratios Debt-to-Equity Ratio 15.2774 36.4745 -118.4352 7.1335 5.2063 Debt Ratio 0.9350 0.9682 0.9977 0.8743 0.8372 Long-term debt to Equity 8.1104 19.8482 -70.6943 4.0714 3.2001 Non-current assets to Net worth 10.5717 25.9883 -80.3418 5.5598 4.5996 Capitalization ratio Current liability ratio 0.8902 0.9520 1.0143 0.8028 0.7619 0.4691 0.4558 0.4031 0.4293 0.3853 Liquidity Raio Current ratio 0.8048 0.7028 0.8036 0.8489 0.8069 Quick ratio (acid-test ratio) 0.7420 0.6403 0.7224 0.7905 0.7404 Cash ratio 0.2623 0.1773 0.2152 0.3515 0.3002

RATIOS 2021 2020 2019 2018 2017 Key Ratios Debt-to-Equity Ratio 15.2774 36.4745 -118.4352 7.1335 5.2063 Debt Ratio 0.9350 0.9682 0.9977 0.8743 0.8372 Long-term debt to Equity 8.1104 19.8482 -70.6943 4.0714 3.2001 Non-current assets to Net worth 10.5717 25.9883 -80.3418 5.5598 4.5996 Capitalization ratio Current liability ratio 0.8902 0.9520 1.0143 0.8028 0.7619 0.4691 0.4558 0.4031 0.4293 0.3853 Liquidity Raio Current ratio 0.8048 0.7028 0.8036 0.8489 0.8069 Quick ratio (acid-test ratio) 0.7420 0.6403 0.7224 0.7905 0.7404 Cash ratio 0.2623 0.1773 0.2152 0.3515 0.3002

Entrepreneurial Finance

6th Edition

ISBN:9781337635653

Author:Leach

Publisher:Leach

Chapter9: Projecting Financial Statements

Section: Chapter Questions

Problem 3bM

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Question 1. WACC Cost of Debt After-tax cost of debt 4.90% Cost of Equity Treasury Bond Rate (risk free rate) 5% Beta 0.48 Risk premium 7% Years 2014 2015 2016 2017 Capital Structure Debt 22% 25% 28% 27% Equity 78% 75% 72% 73% Please calculate following for each of the year from 2014 to 2017 Cost of Debt (before tax) Cost of Equity WACC (Weighted Average Cost of Capital)
Calculate the Weighted Average Cost of Capital (WACC) Cost of Equity = 11.02% Cost of Debt = 5.35% Debt-to-Equity Ratio = 15.52%
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Return on Capital Employed (ROCE) = For Riccarton PLC: ROCE = 50000/380000 X 100 = 13.2% For Edinburgh PLC: ROCE = 45000/230000 X 100 = 19.6% Current Ratio = Current assets/current liabilities For Riccarton PLC: Current ratio = 150/120 = 1.25 For Edinburgh PLC: Current ratio = 80/70 = 1.14 Gearing Ratio = (long term borrowing + short term borrowings) / equity For Riccarton PLC: Gearing ratio = (180 + 100)/200 = 1.4 For Edinburgh PLC: Gearing ratio = (100 + 50)/130 = 1.15 Price/Earnings (P/E) Ratio = Share price / earnings per share For Riccarton PLC: P/E Ratio = 195/35 =5.57 For Edinburgh PLC: P/E Ratio = 451/28 = 16.107 Based on the above ratios explain, which company George H. and James W. should invest in. You should also briefly discuss the limitations of your analysis.
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