Week 4 – Joe’s Fly-By-Night Oil Company – Ratio analysis

the following for

Joe’s Fly-By-Night Oil Company

, whose financial statements are shown below:

 Joe’s Fly-By-Night Oil Company 

NET INCOME $1,800

Addition to retained earnings $1,200

Total assets $40,000

 

Prepare a ratio analysis for the fiscal year ended Dec 31, 2011.  Organize your analysis per the following outline:

 

  

(1) Liquidity

           

– Current ratio

            – Quick ratio

        Comments on liquidity

 

   (2) Asset management

            – Total Asset turnover

            – Average collection period (ACP)

        Comments on asset management

 

   (3) Debt management

            – Debt ratio

            – Times interest earned

        Comments on debt management

 

   (4) Profitability

            – Net profit margin

            – Return on Assets (ROA)

            – Return on Equity (ROE)

            – Extended Du Pont equation

        Comments on profitability to include your comments on the sources of ROE

        revealed by the Du Pont equation

 

   (5) Market value ratios

            – PE ratio

            – Market to book ratio

     Comments on the market value ratios

 

     For the purposes of this exercise, assume the following data for Joe’s Fly-By-Night Oil:

 

                 

Stock price on Dec 31, 2011…$50.00

                  Number of common shares outstanding on Dec 31, 2011…1,000