Chapter 11
Financial Statement Analysis
592
Required
a) Calculate the following ratios for Hathaway 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)
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
Earnings Per Share
b) The owner of Hathaway Inc. is pleased to see that the company has started generating
profits again and assumes that profitability must be improving. Perform some ratio
analysis to determine if the owner’s assumption is correct or not. Explain.
Analysis
What does the company’s inventory turnover ratio indicate/suggest?
