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Regarding to the financial statements given; calculate the liquidity, financial structure and profitability ratios
Regarding to the financial statements given; calculate the liquidity, financial structure and profitability ratios. (2x8=16 pts.) Interprete the results with comparison to the reference values. (2x8=16 pts.) HONDA Motor Company Balance Sheet 2019 ACTIVE PASSIVE TOTAL CURRENT ASSETS 6.8279 TOTAL CURRENT LIABILITIES Total inventories 1.1529 TOTAL LIABILITIES Cash & Short term investments 1.8069 TOTAL EQUITY TOTAL ASSETS 8.2775 6.0508 8.3165 3.6965 HONDA Motor Company Income Statement 2019 TOTAL REVENUE 3.200$ Total Operating Expenses (2.0005) Operating Income 300$ Net Income Before Taxes 1.500$ NET INCOME 1.490$
Expert Solution
Liquidity ratios
Current Ratio = Current Asset / Current liabilities = 1.13
Quick Ratio = Current Asset - Inventories / current liability = 0.93
Financial Structure ratios
Debt to Equity Ratio = Debt / Equity where debt = total liability - current liability = 2266.
Therefore , debt / equity ratio = 2266/ 3696 = 0.61
again, Debt to total asset ratio = 2266/8277 = 0.27
Lastly, the profitability ratios
Operating profit margin = operating profit / sales or revenue = 300/3200 = 9%
Net profit margin = Net Income / sales or revenue =1490/ 3200 = 46%
Return on equity = Net Income / Equity = 1490 /3696 = 40%.
For the part B please provide the reference values for comparison.
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