Question

Using the information below, calculate the following ratios for both companies for 2019 and compare/contrast EACH ratio.

1. DSO
2. Quick Ratio
3. Times Interest Earned
4. Total Liabilities-to-Equity
5. Free Operating cash flow to total debt
6. Current Ratio
7. Total debt to equity
8. Accounts receivable turnover

Account Gross Sales Returns Cost of Sales SG&A expense Interest expense EBIT Cash Accounts Receivable, Gross Allowance for Bad Debt Inventories Current Liabilities ST Debt LT Debt Total Liabilities Stockholder's Equity Cash Flow from Operations Cash Flow from Investing Cash Flow from Financing Capital Expenditures 98 Capri Yr Ended Yr Ended 12/31/1912/31/18 231,296 227,136 4,535 4,016 202,978 200,632 15,820 13,430 254 352 7,709 8,706 45,879 54,799 56,740 54,620 1,520 1,920 31,045 31,032 45,478 32,903 354 120 25,490 18,304 71,322 51,327 63,862 91,044 3,590 4,378 1,253 1,342 78 537 38 Omega Yr Ended Yr Ended 12/31/19 12/31/18 157,608 160,849 1,869 2,999 143,198 144,197 6,230 7,690 125 6,186 5,865 4,389 18,940 2,111 22,851 2,453 2,206 15,762 13,855 6,504 8,403 8,430 14,934 38,851 1,890 189 12 10 10,230 18,633 39,219 2,130 197 18 30 175

Answer 1

1 OSO Ratio Formula Account Receivable / Sales "No of Days Capri = (57740/231296) 365 91.12 Omega (2111/157608)*365 of the result is a low DSO, then it means that the business takes fewer days to collect the receivables. On the other hand, a high OSO entails that it takes more days to collect receivables. Hence DSO ratio of Omega is more faverable than Capri 2 Quick Ratio (Cash & Cash Equivelent + Marketable Securities + Account Receivable)/ Current Liabilitie: Capri (45879.467401/45478 2.04 Omega =(4389.21111/6540 Higher ratio is more fevorable. Hence Capri is more Favorable than Omega 0.99 3 Time Interest Earned Income Before Interest and Tax/ Interest Expenses Capri =7709/254 30.35 Omega =6186/125 49.49 The larger the time interest earned, the more capable the company is at paying the interest on its debt. Hence Omega is more capable to Capri 4 Total Lability to Equity Total Liability/ Shareholder Equity Capri Omega = 71322/63862 = 14934/38851 1.12 0.28 Lower values of debt-to-equity ratio are favorable indicating less risk. Higher debt-to-equity ratio is unfavorable. Hence Omega ratio is more fevorable than Capri 5 Free Operating Cash Flow to Total Debt Operating Cash Flow / Total Debt 0.14 Capri Omega = 3590/(25490+354) = 1890/8430 0.22 A high ratio indicates that a company is better able to pay back its debt. Hence Omega is more capable to Capri 6 Current Ratio Current Assets / Current liability Capri Omega = (46879+56740+1520+31045745478 = (4389+2111+2453+15762/6504 2.99 3.80 Higher ratio is more fevorable. Hence Omega is more Favorable than Capri 7 Total Debt to Equity Total Debt / Equity Capri Omega = (354.254901/63862 8430/38851 0.40 0.22 Lower values of debt-to-equity ratio are favorable indicating less risk. Higher debt-to-equity ratio is unfavorable. Hence Omega ratio is more fevorable than Capri 8 Account Receivable Tournover Net Credit Sale/ Average Account Receivable Capri Omega = (231296-4535/(56740+546203/2) = (157608-1869)/(22852-2111/2) 4.07 12.48 Generally, the higher the accounts receivable turnover ratio, the more efficient your business is at collecting credit from your customers. Hence Omega is more efficient than Capri