Platoon Mental Health Care Inc.

Financial ratios:

The table below summarises the financial ratios calculated:

Garners' Platoon Mental Health Care, INC.

2008

Industry

Current ratio

1.60097324

2.0times

Quick ratio

0.74452555

1.2times

Cash ratio

0.13624595

0.25times

Inventory turnover ratio

1.34715909

2.50times

Day's sale's in inventory

270.940531

146.00days

Average collection period

81.2821285

91.00days

Average payment period

133.469

100.00days

Fixed asset turnover ratio

0.84924966

1.25times

Sales to working capital

2.48751249

4.00times

Total asset turnover ratio

0.54402447

0.50times

Capital intensity ratio

1.83815261

2.00times

Debt ratio

56%

50.00%

Debt-to-equity ratio

0.33755735

1.00times

Equity multiplier

13.133429

2.00times

Times interest earned

7.64761905

7.25times

Cash coverage ratio

8.21

8.00times

Profit margin

27%

18.75%

Basic earnings power ratio

26%

19.90%

ROA

14%

9.38%

ROE

190%

18.75%

Dividend payout ratio

31%

35%

Market-to-book ratio

1.35983793

1.300times

PE ratio

4.23835833

4.100times

Sustainable growth is determined by multiplying return on equity by th retention ration, the retention ratio is determined by the difference between earnings per share and dividends per share by earnings per share. Retention ratio is = 69% and ROE = 190%, this means that sustainable growth =131.03%

DuPont system:

ROE = profit margin X total asset turnover X Equity Multiplier

ROE = 190%

Expenses:

Expenses management is reflected by the profit margin, the firm's profit margin is 27% while the industry value is 18.75%, and this means that the firm manages its expenses properly.

Debt:

Debt management is reflected by the equity multiplier, the equity multiplier for the firm is 13.13 while the industry value is 2, and this means that the firm finances more using debt. This is also reflected by the debt equity ratio whose value is 0.337 while the industry value is 1.

Assets:

Asset management is reflected by the total asset turnover, the value for the firm is 0.54402447 times while the industry value is 0.50 times, and given that the firm's value is greater than the industry value then the conclusion is that the firm manages its assets properly. This is also reflected by the ROA where the value is 14% for the firm and 9.38% for the industry.

Reference:

Block, S. (2009). Foundation of financial Management, New Jersey: Prentice hall press.