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Huffman Trucking Company

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by

Candi Stremcha

on 21 November 2013

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Transcript of Huffman Trucking Company

Huffman Trucking Company
Profitability Ratios
Asset Turnover
Profit Margin
Return On Assets
Return on Stockholders' Equity
Solvency Ratio
Debt To Total Assets
Times Interest Earned
Liquidity Ratios
Current Ratios
Acid-test, or Quick, Ratio
Receivables Turnover
Inventory Turnover
Horizontal and Vertical Analysis
Current Ratio
The Current Ratio measures a company’s short-term debt paying ability.
You arrive at this ratio by dividing the Total Assets (from Balance Sheet) by the Total Liabilities.

2011 - 267,265 / 90,283 = 3:1 current ratio

2010 - 255,328 / 89,435 = 2.9:1 current ratio

This means the Huffman Trucking company’s ability to pay their short-term debt rose by 1/10 of one percent from the previous year.

Team A:
Anissa Kieline
Craig Mchattie
Dana Mellors
Candice Stremcha

Liquidity ratios are used to determine a company’s ability to meet its short-term debt obligations.
Creditors / Investors / Suppliers
Acid-test, or Quick, Ratio
The Acid Test (quick) Ratio measures a company’s short-term liquidity
You arrive at this ratio by adding cash, short-term investments and net receivables and dividing them by the current liabilities from the balance sheet. ( I included the net Carrier Operating Property in the calculation as the short-term investment.)

2011 - 89,664 + 15,770 + 51,869 / 90,283 = 1.7:1

2010 - 58,003 + 14,342 + 81,557 / 89,435 = 1.7:1

Huffman Trucking’s short-term liquidity remained unchanged from 2010 to 2011.

Receivables Turnover
By dividing net credit sales by the average net receivables you can obtain the receivables turnover. Since this is a service business, and no net credit sales are represented in the report, we will take 60% of total revenues to equal the net credit sales.
(Revenues = $1,109,295 x .60 = 665,577)

2011- 665,577 / 51,869 + 81,557 / 2 (or 66,713) = 9.98 times

To turn this into days, you divide 365 days by the times A/R can be turned over in the year. According to this figure, it takes 37 days to turnover A/R. Although this is more than the ideal 30 days, most of the accounts with Huffman Trucking are long-term accounts.

Inventory Turnover
Huffman Trucking is a service industry, and therefore does not have saleable inventory or inventory turnover.
References:
Weygandt, J.J., Kimmel, P.D., & Kieso, D.E.
(2010). Financial accounting (7th ed.). Hoboken, NJ: John Wiley & Sons.
Virtual Organizations
Huffman Trucking Company
Established 1936 - Single Tractor Trailer
Growth WWII
1945 - Grew to 16 Tractors / 36 Trailers
Current: 800 road tractors, 2,100 trailers 260 "roll-on/roll-off" units
Employment: 925 drivers; 425 support personnel
Located in CA, OH, MO, NJ
Privately Held
Agenda:
Liquidity Ratios
Profitability Ratios
Solvency Ratios
Vertical / Horizontal Analysis - Balance Sheet
Vertical / Horizontal Analysis - Income Statement
Evaluation of Data and What it Reveals About Our Company
Asset Turnover
• Formula (Revenue / Total Assets)
(2010) 969,240 / 255,328 = 3.8
(2011) 1,109,295 / 267,265 = 4.15

Helps determine whether a company’s
revenue is proportional to sales
Profit Margin
• Formula (Net Income / Revenue)
or (Net Profit / Net Sales)

(2010) 55,508 / 969,240 = .057 (5.7%)
(2011) 59,167 / 1,109,295 = .053 (5.3%)

Measures the amount of earnings a company keeps.

Useful when comparing companies in similar industries
Customers / Manager / Government Agencies
Return On Assets
• Formula (Net Income / Total Assets)
(2010) 55,508 / 255,328 = .217 (21.7%)
(2011) 59,167 / 267,265 = .221 (22%)

An indicator of how profitable a company is relative to its total assets.

Return On Common Stockholders' Equity (ROE)
• Formula (Net Income / Shareholders Equity)
(2010) 55,508 / 100,659 = .551 (55%)
(2011) 59,167 / 105,617 = .560 (56%)

Measures profitability by the amount of profit made by using the money generated from investment money provided by shareholders.
-Does not include preferred shares-

Needs to prove that the business can pay the interest on the debt as well as pay the principal when the debt matures
Long-Term Creditors / Shareholders
Debt to Total Assets = Total Debt / Total Assets


2011 $161,648 / $267,265 = 0.6048
2010 $154,669 / $255,328 = 0.6058
Debt to Total Assets
Times Interest Earned
Times Interest Earned = Income Before Taxes and Interest Expense / Interest Expense
2011 $94,520 / $446 = 211.9283 times
2010 $89,199 / $768 = 116.1445 times
Horizontal
Full transcript