Joe’s Fly-By-Night Oil Company Essay

Prep ar a dimension outline for the fiscal year ended Dec 31, 2012. Organize your analysis per the sideline outline(1) Liquidity Current ratio 25,000/17,000=1.47%Quick ratio 25,000-17,000/17,000=25,000Comments on liquidity- The results cant really determine how well or bad the caller-out is doing until you compare it to another connection. This ratio helps show the ability to pay dour short term obligations as they are due.(2) Asset focus jerk off Asset turnover 10,000/40,000=.25Average collection period (ACP) 10,000/365=273,000/27=111 daysComments on asset management- Each $1 of asset is producing .25 in sales. Using assest utilization shows why one soaked turns over assests more than rapied than another. Average collection period states that its taking the customer more or less 111days to pay off their bills. This assigns how long sales stay on companys book of accounts.(3) Debt management Debt ratio 20,000/40,000=50%Times use up earned 3,000/200=15 generationComme nts on debt management- Times interest earned shows the number of times that income before interest and taxes covers the interest obligation . The higher the ration the stronger the interest paying ability of the firm .(4) Profitability Net put on border1800/10,000= 18%-Return on Assets (ROA) 1800/40,000= 4.5%-Return on Equity (hard roe) 1800/20,000= 9.0%Extended Du Pont equation .25x.18-0.045(4.5%)Comments on profitability to include your comments on the sources of ROErevealed by the Du Pont equationThese types of ratios indicate if the firm is making any money, and how much in relation to whats invested. They besides give you an indication of how the firm is doing in controlling its costs.Net profit margin sales minus all expenses, including interest and taxes . So the exculpate profit margin ratio measures the proportion of each sale buck that remains after all expenses are paid for . Joes is at 18% .The ROA should be compared to past years ROA to determine wheather it is go od or bad. The ROE is the bottome line which can be compared to other investments and see where they are. It evaluates the return the firm produces. The Du Point equation allows you to understand the source of return but it remove to be compared to a similar industry to see truly where the company is.(5) Market time value ratios PE ratio Market price of company pack /earnings per share of stock 50.00/1.80=27.7 Market to book ratio circumstances price of stock/book value per shareTo get the book value per share you take total equity /common shares superior 20,000/1,000=20 then you take share price /book value per share 1.80/20=.09Comments on the market value ratiosThe M/B ratio gives you an indication of the value of a firms intangible asset non-listed assests. These numbers help you get an idea what it will cost you to get $1 of the firms assets. Stocks market price represents how much investors are willing to pay today for that margin call. I the M/B ratio is higher than 1.0 therefore , you can say that the value of the equity claim has gone up. If you look at the M/B ratio for Joes the equity claim has gone up since its at 27.2.For the purposes of this exercise, assume the hobby data for Joes Fly-By-Night OilStock price on Dec 31, 2012$50.00Number of common shares outstanding on Dec 31, 20121,000