Consider the following financial statements for Green Valley Nursing Home, Inc., a for-profit, long-term care facility:
a. Perform a Du Pont analysis on Green Valley. Assume that the industry average ratios are as follows:
Total margin 3.5%
Total asset turnover 1.5
Equity multiplier 2.5
Return on equity (ROE) 13.1%
b. Calculate and interpret the following ratios:
Return on assets (ROA) 5.2%
Current ratio 2.0
Days cash on hand 22 days
Average collection period 19 days
Debt ratio 71 %
Debt-to-equity ratio 2.5
Times interest earned (TIE) ratio 2.6
Fixed asset turnover ratio 1.4
c. Assume that there are 10,000 shares of Green Valleyâ€™s stock outstanding and that some recently sold for $45 per share.
â€¢ What is the firmâ€™s price/earnings ratio?
â€¢ What is its market/book ratio?