Calculation of Debt Ratio and Total Asset Turnover Ratio.
Utilizing the attached Enclosure 1 “Balance Sheet and Income Statement for Spectrum, Inc”
|Spectrum, Inc. BALANCE SHEET (000)|
|Net fixed assets||5,000|
|Total current liabilities||1,500|
|Long term debt||4,000|
|Total liabilities and owner’s equity||$7,500|
|Spectrum, Inc. INCOME STATEMENT (000)|
|Cost of goods sold||3,400|
|Net operating income||2,200|
|Earnings before taxes||1,620|
|Income tax (34%)||551|
a) Compute the following ten (10) financial ratios and provide a one sentence explanation of the analytic use of each ratio test. Show your formulas and input. Accuracy to two decimal points is sufficient.
b) Evaluate how Spectrum’s financial performance compares to their Industry for each calculated ratio. It is sufficient to rate each ratio as “G”= good, “S” = satisfactory, or “P” = poor.
|Total asset turnover||1.18|