Question# 4Sultan Gardens owns and operates Eastern Gear, a small merchandiser in outdoor recreationalequipment. You are hired to review the three most recent years of operations for Eastern Gear.Your financial statement analysis reveals the following results:200620052004Sales index number trendSelling expenses to net sales137.0125.0100.09.8%13.7%15.3%Sales to plant assets3.5 to 13.3 to 13.0 to 1Current ratioAcid-test ratioMerchandise inventory turnoverAccounts receivable turnoverTotal asset turnover2.6 to 12.4 to 12.1 to 10.8 to 11.1 to 11.2 to 17.5 times8.7 times9.9 times6.7 times7.4 times8.2 times2.6 times2.6 times3.0 timesReturn on total assets8.8%9.4%10.1%Return on owner's equity9.75%11.50%12.25%Net profit margin3.3%3.5%3.7%Required:Use these data to answer each of the following questions with explanations:a) Is it becoming easier for the company to meet its current debts on time and to takeadvantage of cashb) discounts?c) Is the company collecting its accounts receivable more rapidly over time?d) Is the company's investment in accounts receivable decreasing?e) Are dollars invested in inventory increasing?f) Is the company's investment in plant assets increasing?g) Is the owner's investment becoming more profitable?h) Is the company using its assets efficiently?i) Did the dollar amount of selling expenses decrease during the three-year period?

Ratio Analysis The purpose of measuring the Ratio analysis which indicate that the strength and…

Required: Use these data to answer each of the following questions with explanations: a) Is it becoming easier for the company to meet its current debts on time and to take advantage of cash b) discounts? c) Is the company collecting its accounts receivable more rapidly over time? d) Is the company's investment in accounts receivable decreasing? c) Are dollars invested in inventory increasing? ) Is the company's investment in plant assets increasing? g) Is the owner's investment becoming more profitable? h) Is the company using its assets efficiently? i) Did the dollar amount of selling expenses decrease during the three-year period?

Required: Use these data to answer each of the following questions with explanations: a) Is it becoming easier for the company to meet its current debts on time and to take advantage of cash b) discounts? c) Is the company collecting its accounts receivable more rapidly over time? d) Is the company's investment in accounts receivable decreasing? c) Are dollars invested in inventory increasing? ) Is the company's investment in plant assets increasing? g) Is the owner's investment becoming more profitable? h) Is the company using its assets efficiently? i) Did the dollar amount of selling expenses decrease during the three-year period?

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter12: Corporate Valuation And Financial Planning

Section: Chapter Questions

Problem 12SP

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