East Coast Yacht Industries Case Study

EAST COAST YACHTS INDUSTRIES

1.

East Coast Yachts Financial Ratios |

Current Ratio | 0.75 times |

Quick Ratio | 0.43 times |

Total Assets Turnover | 1.54 times |

Inventory Turnover | 19.22 times |

Receivables Turnover | 30.77 times |

Debt Ratio | 0.49 times |

Debt-Equity Ratio | 0.96 times |

Equity Multiplier | 1.96 times |

Interest Coverage | 7.96 % |

Profit Margin | 7.51 % |

Return on Assets | 11.57% |

Return on Equity | 22.7% |

2. Performance of ECY to the industry as a whole.

Financial Ratios | Value | Yachts Industry Ratios |

| | Lower Quartile | Median | Upper Quartile |

Current Ratio | 0.75 | 0.50 | 1.43 | 1.89 |

Quick Ratio | 0.43 | 0.21 | 0.38 | 0.62 |

Total Assets Turnover | 1.54 | 0.68 | 0.85 | 1.38 |

Inventory Turnover | 19.22 | 4.89 | 6.15 | 10.89 |

Receivables Turnover | 30.77 | 6.27 | 9.82 | 14.11 |

Debt Ratio | 0.49 | 0.44 | 0.52 | 0.61 |

Debt-Equity Ratio | 0.96 | 0.79 | 1.08 | 1.56 |

Equity Multiplier | 1.96 | 1.79 | 2.08 | 2.56 |

Interest Coverage | 7.96 | 5.18 | 8.06 | 9.83 |

Profit Margin | 7.51 % | 4.05% | 6.98% | 9.87% |

Return on Assets | 11.57% | 6.05% | 10.53% | 13.21% |

Return on Equity | 22.7% | 9.93% | 16.54% | 26.15% |

a. Current Ratio:

Current Ratio of 0.75 times means that East Cost Yachts (ECY) has its current liabilities covered by 0.75 times or it has $0.75 in current assets for every $1 in current liabilities. This situation is not good for East Cost Yachts because current assets cannot be used to repay the current liabilities when these liabilities are due. It is negative compared to the Yacht Industry average which the current ratio is 1.43 (higher than ECY’s current ratio) means that ECY has relatively lower liquidity positions than the average of its competitors. If it needs quick cash to fulfill the liabilities’ payment, the company will be in trouble.

b. Quick Ratio

Quick Ratio of 0.43 times means that East Cost Yachts (ECY) has its current...