1. GET RICH QUICK CO. Financial Statement Ratio Analysis: Profitability Long-Term Financial Position Short-Term Financial Position

2. Basics of FSA These ratios do not exist in a vacuum By themselves, they do not provide much meaning They need to be compared to something: –Trends over time –Key competitors –Industry averages

3. PROFITABILITY EARNINGS PER SHARE

4. Net Income – Preferred Dividends

5. PROFITABILITY EARNINGS PER SHARE Net Income – Preferred Dividends Number of Common Shares Outstanding

6. PROFITABILITY EARNINGS PER SHARE Net Income – Preferred Dividends Number of Common Shares Outstanding $180,000- 0

7. PROFITABILITY EARNINGS PER SHARE Net Income – Preferred Dividends Number of Common Shares Outstanding $180,000 - 0 100,000 shares

8. PROFITABILITY EARNINGS PER SHARE Net Income – Preferred Dividends Number of Common Shares Outstanding $180,000 - 0 = $1.80 100,000 shares

9. PROFITABLITY PRICE/EARNINGS RATIO

10. Market Price per Share

11. PROFITABLITY PRICE/EARNINGS RATIO Market Price per Share Earnings per Share

12. PROFITABLITY PRICE/EARNINGS RATIO Market Price per Share Earnings per Share $18.00

13. PROFITABLITY PRICE/EARNINGS RATIO Market Price per Share Earnings per Share $18.00 $1.80

14. PROFITABLITY PRICE/EARNINGS RATIO Market Price per Share Earnings per Share $18.00 = 10 $1.80

15. PROFITABILITY RETURN ON ASSETS

16. (Income + Interest Exp.) X Sales Sales Assets

17. PROFITABILITY RETURN ON ASSETS (Income + Interest Exp.) X Sales Sales Assets (Operating Margin) X (Asset Turnover)

18. PROFITABILITY RETURN ON ASSETS (Income + Interest Exp.) X Sales Sales Assets (Profit Margin) X (Asset Turnover) ($180,000+30,000) $3,000,000

19. PROFITABILITY RETURN ON ASSETS (Income + Interest Exp.) X Sales Sales Assets (operating Margin) X (Asset Turnover) $180,000+30,000 X $3,000,000 = 13% $3,000,000 $1,620,000

20. PROFITABILITY RETURN ON EQUITY

21. Net Income

22. PROFITABILITY RETURN ON EQUITY Net Income Stockholders’ Equity

23. PROFITABILITY RETURN ON EQUITY Net Income Stockholders’ Equity $180,000

24. PROFITABILITY RETURN ON EQUITY Net Income Stockholders’ Equity $180,000 $1,080,000

25. PROFITABILITY RETURN ON EQUITY Net Income Stockholders’ Equity $180,000 = 16.7% $1,080,000

26. LONG-TERM FIN. CONDITION RATIO OF DEBT TO ASSETS

27. Liabilities

28. LONG-TERM FIN. CONDITION RATIO OF DEBT TO ASSETS Liabilities Assets

29. LONG-TERM FIN. CONDITION RATIO OF DEBT TO ASSETS Liabilities Assets $540,000

30. LONG-TERM FIN. CONDITION RATIO OF DEBT TO ASSETS Liabilities Assets $540,000 $1,620,000

31. LONG-TERM FIN. CONDITION RATIO OF DEBT TO ASSETS Liabilities Assets $540,000 = 33.3% $1,620,000

32. LONG-TERM FIN. CONDITION RATIO OF EQUITY TO ASSETS

33. Stockholders’ Equity

34. LONG-TERM FIN. CONDITION RATIO OF EQUITY TO ASSETS Stockholders’ Equity Assets

35. LONG-TERM FIN. CONDITION RATIO OF EQUITY TO ASSETS Stockholders’ Equity Assets $1,080,000

36. LONG-TERM FIN. CONDITION RATIO OF EQUITY TO ASSETS Stockholders’ Equity Assets $1,080,000 $1,620,000

37. LONG-TERM FIN. CONDITION RATIO OF EQUITY TO ASSETS Stockholders’ Equity Assets $1,080,000 = 66.7% $1,620,000

38. CURRENT FIN. CONDITION CURRENT RATIO

39. Current Assets

40. CURRENT FIN. CONDITION CURRENT RATIO Current Assets Current Liabilities

41. CURRENT FIN. CONDITION CURRENT RATIO Current Assets Current Liabilities $280,000

42. CURRENT FIN. CONDITION CURRENT RATIO Current Assets Current Liabilities $280,000 $40,000

43. CURRENT FIN. CONDITION CURRENT RATIO Current Assets Current Liabilities $280,000 = 7 $40,000

44. CURRENT FIN. CONDITION Quick Ratio

45. “Quick Assets”

46. CURRENT FIN. CONDITION Quick Ratio “Quick Assets” Current Liabilities

47. CURRENT FIN. CONDITION Quick Ratio “Quick Assets” Current Liabilities $200,000

48. CURRENT FIN. CONDITION Quick Ratio “Quick Assets” Current Liabilities $200,000 $40,000

49. CURRENT FIN. CONDITION Quick Ratio “Quick Assets” Current Liabilities $200,000 = 5 $40,000

50. CURRENT FIN. CONDITION Avg. Collection Period

51. Accounts Receivable

52. CURRENT FIN. CONDITION Avg. Collection Period Accounts Receivable Average “Daily Sales”

53. CURRENT FIN. CONDITION Avg. Collection Period Accounts Receivable Average “Daily Sales” $150,000

54. CURRENT FIN. CONDITION Avg. Collection Period Accounts Receivable Average “Daily Sales” $150,000 $3,000,000 /360 days (= $8,333)

55. CURRENT FIN. CONDITION Avg. Collection Period Accounts Receivable Average “Daily Sales” $150,000 = 18 days $3,000,000 /360 days (= $8,333)

56. CURRENT FIN. CONDITION Avg. Days Supply in Inventory

57. Inventory

58. CURRENT FIN. CONDITION Avg. Days Supply in Inventory Inventory Avg. “Daily Cost of Goods Sold”

59. CURRENT FIN. CONDITION Avg. Days Supply in Inventory Inventory Avg. “Daily Cost of Goods Sold” $80,000

60. CURRENT FIN. CONDITION Avg. Days Supply in Inventory Inventory Avg. “Daily Cost of Goods Sold” $80,000 $2,000,000/360 days (= $5,555)

61. CURRENT FIN. CONDITION Avg. Days Supply in Inventory Inventory Avg. “Daily Cost of Goods Sold” $80,000 = 14.4 days $2,000,000/360 days (= $5,555)

62. reuters