Chapter 11
Financial Statement Analysis
568
Required
a) Calculate the following ratios for Fallon Inc. for 2015 and 2016, and state whether the ratio
improved or weakened in 2016.
2016
2015
Improved or
Weakened
Gross Profit Margin
EBIT
EBIT Percentage to Sales
Interest Coverage Ratio
Net Profit Margin
Return on Equity (ROE)
Return on Assets (ROA)
Asset Turnover
Current Ratio
Quick Ratio
Debt-to-Equity Ratio
Debt-to-Assets Ratio
Days Sales Outstanding
Accounts Receivable Turnover
Inventory Days on Hand
Inventory Turnover
Book Value per Share
Dividend Payout Ratio
Earnings per Share
b) Fallon Inc. has a credit policy of 30 days. That is, it expects all customers to pay their bills
within 30 days from sale. Comment on the company's ability to enforce this policy.
