FINANCIAL RATIOS
QUICK RATIOS
Current ratio
This measures the firm's ability to meet its short term financial obligations. It is calculated as
Current Ratio
??=??
Current Assets
Current Liabilities
283,059
=1.049673
269,664
From the case,
Quick Ratio
??=??
Current Assets - Inventory
Current Liabilities
4,840
= 0.017948
269,664
From the case,
Cash Ratio
??=??
Cash ?+? Marketable Securities
Current Liabilities
From the case,?
246,752
=0.915035
269,664
This clearly means the firm cannot meet its short term financial obligations
ASSET TURNOVER RATIOS
These ratios indicate of how efficiently the firm utilizes its assets. Receivables turnover is an indication of how quickly the firm collects its accounts receivables. It is usually reported in terms of the number of days that credit sales remain in accounts receivable before they are collected. The result is known as the collection period. It is calculated as
Receivables Turnover =
Annual Credit Sales
Accounts Receivable
The information on Annual Credit Sales is not provided hence this ratio cannot be determined
Inventory turnover
It is the cost of goods sold in a time period divided by the average inventory level during that period
Inventory Turnover =
Cost of Goods Sold
Average Inventory
The information on Cost of goods sold is not provided hence this ratio cannot be determined
FINANCIAL LEVERAGE RATIOS
These ratios are concerned with the long-term solvency of the firm. The ratios measure the extent to which the firm is using long term debt.
Debt Ratio =
Total Debt
Total Assets
Debt Ratio =
324,752
=0.235511
1,378,923
? ? ? ? ?
Debt-to-Equity Ratio =
Total Debt
Total Equity
Debt-to-Equity Ratio =
324,752
=0.783152
414,673
From the ratios, JetBlue is using long term debt as a source of financing
PROFITABILITY RATIOS
Return on Assets (ROA)
This ratio measures how effectively the firm's assets are being used to generate profits
Net Income
Return on Assets (ROA) =
----------------------------------
Average Total Assets
From the case study,
Return on Assets (ROA) =
Packers #12 Rodgers Jersey54,908
=0.556295
98,703
This means that for every dollar of assets, JetBlue uses 0.55 to generate profits
Return on Equity (ROE)
This ratio measures the profits earned for each dollar invested in the firm's stock
Net Income
Return on Equity (ROE) =
--------------------------------------------
Average Stockholders' Equity
Return on Equity (ROE) =
54,908
0.132413
414,673
?This implies that JetBlue earns 0.132 as profits from each dollar of stock
Return on Common Equity (ROCE)
This ratio measures the profits earned for each dollar invested in the firm's stock from common equity
Net Income
Return on Common Equity (ROCE) =
--------------------------------------------
Average Common Stockholders' Equity
From the case study,
Return on Common Equity (ROCE) =
54,908
=0.00011
500,000,000
???
Profit Margin
This ratio is a measure of the gross profit earned on sales. It is calculated as
Net Income
Profit Margin =
-----------------
Sales
There is no information on the sales
Earnings Per Share (EPS)
This ratio measures the average earning per share invested in JetBlue
Net Income
Earnings Per Share (EPS) Packers #12 Rodgers Jersey =
---------------------------------------------
Number of Common Shares Outstanding
???
From the case study
Earnings Per Share (EPS) =
54,908
=0.008388
6,545,950
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