Answer the Problem Set Question #7 Calculating a company’s financial ratios

Address the questions and calculate the ratios. Please use formulas on pages 14-15

Using the information provided, calculate this firm’s ROA, ROE, gross profit margin, and quick ratio. If this firm’s WACC is 6.6 percent and the average firm in its industry has an ROA of 8 percent, is this firm earning above or below normal economic performance and above or below average accounting performance?

Net sales 6,134        Operating cash 3,226  Net other operating assets 916

Cost of goods sold (4,438)         Accounts receivable 681Total assets 5,161

Selling, general administrative expenses (996)    Inventories 20  Net current liabilities 1,549

Other expenses (341)      Other current assets 0 Long-term debt 300

Interest income 72           Total current assets 3,927   Deferred income taxes 208

Interest expense (47)       Gross properties, plant, equipment 729   Preferred stock 0

Provision for taxes (75)      Accumulated depreciation (411)  Retained earnings 0

Other income 245            Book value of fixed assets 318   Common stock 3,104

Net income 554           Goodwill 0Other liabilities 0  Total liabilities and equity 5,161