Huffman Trucking Case Study

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Memo to CEO Liquidity Ratios Current Ratio To compute the current ratio, divide current assets by current liabilities (Kimmel, Weygandt, & Kieso, 2010). The calculation for Huffman Trucking’s current ratio in 2011 is 147,800 ÷ 90,283 = 1.64. Acid-Test Ratio The formula for calculating acid-test ratio is (Cash + Accounts Receivable + Short-term Investments) ÷ Current Liabilities. The computation for Huffman Trucking’s 2011 Acid Test Ratio is as follows: (89,664 + 51,869) ÷ 90,283 = 1.57. Receivables Turnover The Accounts Receivable Turnover Ratio assess liquidity of receivables by measuring the number of times an average company collects Accounts Receivable during a period (Kimmel et. al., 2010). To determine this figure, divide net …show more content…

To calculate this ratio, add the cost of production materials and supplies purchased for a period to the total starting value of the inventory. Huffman Trucking did not provide information pertaining to inventory, which means that inadequate information exists to determine this …show more content…

Calculating this figure allows businesses to determine profit without having to make allowances for manufacturing costs (Kimmel et. al, 2010). To calculate the profit margin divide Net Income by Net Sales. The profit margin for Huffman Trucking is 59,167 ÷ 1,109,295 = 0.053 which equals a profit margin of 5.3% for 2011. Return on Assets The Return on Assets is a ratio, which demonstrates how much profit a company keeps from each dollar of sales earned. This figure demonstrates how a company uses their money. To calculate the Return on Assets Ratio divide Net Income by Total Assets. The Return on Assets Ratio for Huffman Trucking for 2011 is 59,167 ÷ 267,265 = 0.22 or 22%. Return on Common Stockholder’ Equity The Return on Common Stockholders’ Equity Ratio is one of the most important investor considerations prior to investment. This ratio discloses how much profit a company makes with capital invested by stockholders. To determine this ratio, divide Net Income by Equity. The Return on Common Stockholders’ Equity for Huffman Trucking in 2011 was 59,167 ÷ 105,617 =

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