Question

table 2.3 shows financial statements for the nano networks inc. the closing stock price for Nano networks was $56.67 (split adjusted) on December 31, 2009. On the basis of the financial data presented, compute the various financial ratios and make an informed analysis of Nano's financial health. Note that the balance sheet and income statement entries in this problem are not complete. Only the relevant entries are listed. Do not attempt to add individual entries to confirm either current assets or current liabilities.

a) Dept Ratio

b) Times-interest-earned ratio

c) Current ratio

1OW TIOIII lie prUjeel during the first year Table P2.3 shows financial statements for Nano Networks Inc. The closing stock price for Nano Networks was $56.67 (split adjusted) on December 31, 2009. On the basis of the financial data presented, compute the various financial ratios and make an informed analysis of Nano's financial health. Note that the balance sheet and the income statement entries in this problem are not complete. Only relevant entries are listed. Do not attempt to add individual entries to confirm either current assets or current liabilities. (a) Debt ratio (b) Times-interest-earned ratio (c) Current ratio 2.3

Answer 1

a) Debt ratio = Total Liabilities/Total Assets

= $55,665/$513,378

= 0.108 or 0.11

Working note: $55,665 ($513,378 - $457,713)

Hence, the debt ratio is 0.108 or 0.11.

b) Times-interest-earned ratio = Earnings before Interest and Tax Expense (EBIT)/Interest Expense

This ratio can't be calculated because Interest Expense is not given in the problem.

c) Current Ratio = Current Assets/Current Liabilities

= $377,833/$55,663

= 6.79

Hence, the current ratio is 6.79.