Title: Calculating and Analyzing Ratios
Based on the financial information provided, calculate the following ratios and explain their purpose:
Current Ratio Inventory Turnover Ratio Accounts Receivable Turnover Ratio Debt to Equity Ratio Return on Assets Ratio Asset Turnover Ratio Return on Equity Ratio Profit Margin Ratio Price-Earnings Ratio Dividend Yield Ratio Note: When a balance sheet amount is related to an income statement amount in computing a ratio, the balance sheet amount should be an average of that period. The average is calculated by adding the ending balances of this year and last year and dividing the result by 2. Describe how a bank lending officer might use ratio analysis. Select five ratios that would be most useful for the purpose and explain the rationale for your selection.
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12/31/10
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12/31/09
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Amount in Dollars
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Amount in Dollars
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Cash
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200.00
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150.00
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Receivables
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500.00
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350.00
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Inventories
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750.00
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755.00
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Other Current Assets
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100.00
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75.00
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Total Current Assets
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1,550.00
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1,330.00
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Plant and Equipment
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1,100.00
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1,170.00
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Other Long - Term Assets
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150.00
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100.00
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Total Assets
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2,800.00
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2,600.00
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Accounts Payable
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510.00
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400.00
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Other Current Liabilities
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25.00
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25.00
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Total Current Liabilities
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535.00
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425.00
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Long Term Debt
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375.00
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400.00
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Other Long Term Liabilities
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225.00
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175.00
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Preferred Stock
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250.00
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250.00
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Shareholders' Equity
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1,415.00
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1,350.00
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Total Liabilities and Shareholders' Equity
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2,800.00
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2,600.00
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Year-2010
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Year-2009
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|
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Amount in Dollars
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|
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Net Sales
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3500.00
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3200.00
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Cost of Goods Sold
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2200.00
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2100.00
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Other Expenses
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300.00
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250.00
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Depreciation
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77.00
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62.00
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Interest Expenses
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40.00
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46.00
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Tax
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200.00
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150.00
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Net Income
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683.00
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592.00
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Preferred Stock Dividend
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25.00
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Common Stock Dividends
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260.00
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Market Value of Equity
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4000.00
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Average Number of Shares
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100.00
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Share Price
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40.00
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Dividends per Share
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2.60
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Earnings per Share
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6.58
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