**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

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