Question

Much of the research on the minimum efficient scale suggests that for many firms the LRAC curve is?

Summary Problem 15-2 JAVA, INC Four-Year Selected Financial Data (adapted) Years Ended January 31, 2013-2010 -toperatin Results Net sales 13,848 $13,673 $11,63 9,0S4 6,7755,318 Cost of goods sold Interest expense Income from operations Income x expense Ner income (net loss) 8,5996,77S 9,704 109 338 100 75 45 1,4551,817 1,333 263 338 247 877 1,127 76 Cash dividends Financial Position 76 1,677 1.48:10.95:11.25:1 1.20 75 1,904 1,462 5,189 1,056 3,963 Current ratio Srockholders equiry Average number of shares of common stock 2.928 2.630 1574 3,010 outstanding (in thousands) 860 879 895 576 Dollar amounns are in thowsands Requirement Using the financial data presented above, compute the following ratios and evaluate Java's results for 2011-2013: 1. Rate of return on net sales 2. Earnings per share 3. Inventory turnover 4. Times-interest-earned ratio 5. Rate of return on common stockholders' equity 6. Gross profit percentage

Answer 1

(1) Rate of return on net sales = net income/net sales (in %)

	2013	2012	2011
Net sales	13,848.00	13,673.00	11,635.00
Net income/(loss)	-8.00	877.00	1,127.0000
Rate of return on net sales (%)	-0.06	6.41	9.69

(2): EPS = Net income/avg. no. of shares outstanding

	2013	2012	2011
Net income/(loss)	-8	877	1,127
Avg. no of shares	860	879.00	895.0000
EPS	-0.0093	0.9977	1.2592

(3): Inventory turnover = cost of goods sold/avg. inventory

	2013	2012	2011	2010
Cost of goods sold	9,704	8,599.00	6,775.00
Inventory	1,677	1,904.00	1,462.00	1,056.00
Average inventory	1,790.50	1,683.00	1,259.00
Inventory turnover	5.42	5.11	5.38

(4): Times interest earned ratio = income from operations/interest

	2013	2012	2011
Income from operations	338.00	1,455.00	1,817.00
Interest	109.00	75.00	45.00
Times interest earned	3.10	19.40	40.38

(5): Rate of return on equity = net income/average shareholders equity

	2013	2012	2011	2010
Net income/(loss)	-8	877	1,127
Equity	3,010.00	2,928.00	2,630.00	1,574.00
Average equity	2,969.00	2,779.00	2,102.00
Rate of return on equity (%)	-0.27	31.56	53.62

(6): Gross profit % = gross profit/sales

	2013	2012	2011
Sales	13,848.00	13,673.00	11,635.00
less: cost of goods sold	-9,704.00	-8,599.00	-6,775.00
Gross profit	4,144.00	5,074.00	4,860.00
Gross profit %	29.92	37.11	41.77