ATC 10-4 Business Applications Case: Performing ratio analysis using real-world data
Bojangels’, Inc. operates Cajun-themed fast-food restaurants. As of December 25, 2016, Bojangels’ had 309 company-operated restaurants and 404 domestic franchised restaurants located in 11 states, and 3 franchised restaurants outside the United States. The following data were taken from the company’s 2016 annual report. All dollar amounts are in thousands.
| Account Title | December 25, 2016 | December 27, 2015 |
|---|---|---|
| Current assets | $26,024 | $28,121 |
| Total assets | $559,772 | $558,306 |
| Current liabilities | $48,579 | $45,102 |
| Total liabilities | $348,982 | $391,182 |
| Interest expense | $7,489 | $8,314 |
| Income tax expense | $19,537 | $16,034 |
| Net income | $37,716 | $26,526 |
Required
a. Calculate the EBIT for each year.
b. Calculate the times-interest-earned ratio for each year.
c. Calculate the current ratio and debt-to-assets ratio for each year.
d. Did the company’s level of financial risk increase or decrease from 2015 to 2016? Explain.
ATC 10-5 Business Applications Case: Performing ratio analysis using real-world data
The following data are for the 2016 fiscal year of Alphabet, Inc., which is the parent company of Google, Inc., and Facebook, Inc. All dollar amounts are in thousands.
| Account Title | Alphabet, Inc. | Facebook, Inc. |
|---|---|---|
| Current assets | $105,408 | $34,401 |
| Total assets | $167,497 | $64,961 |
| Current liabilities | $16,756 | $2,875 |
| Total liabilities | $28,461 | $5,767 |
| Stockholders’ equity | $139,036 | $59,194 |
| Interest expense | $124 | $10 |
| Income tax expense | $4,672 | $2,301 |
| Net income | $19,478 | $10,217 |
Required
a. Calculate the EBIT for each company.
b. Calculate each company’s debt-to-assets ratio, current ratio, and the times-interest-earned ratio.
c. Calculate each company’s return-on-assets ratio using EBIT instead of net earnings. Calculate each company’s return-on-equity ratio using net earnings.
d. Alphabet reported interest expense of $124 million, before taxes. What was its after-tax interest expense in dollars? (Hint: You will need to compute its tax rate by dividing income tax expense by earnings before taxes, which must be computed.)
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