On February 14, 2012, Goodyear Tire & Rubber Company, with world headquarters in Akron, Ohio, reported on their 2011 4thquarter…

On February 14, 2012, Goodyear Tire & Rubber Company, with world headquarters in Akron, Ohio, reported on their 2011 4thquarter earnings. Their total revenue for the quarter that ended on December 31, 2011, was $5,683,000,000; cost of revenue was $4,815,000,000; giving a gross profit of $868,000,000. After subtracting all operating expenses, they reported net income of $25,000,000. The income available to common shareholders (Goodyear has some preferred shareholders that get dividends first) was $18,000,000. Goodyear has 245,000,000 common shares of stock outstanding. Goodyear also reported they have total assets of $17,629,000,000; total current liabilities of $5,929,000,000; total current assets of $9,812,000,000; inventory valued at $3,812,000,000; total liabilities of $16,880,000,000. For the entire year GT had net income of $321m for EPS of $1.32.
1. Calculate their current ratio (Current Assets/Current Liabilities)= __________
2. Calculate their quick ratio ((Current Assets – Inventory)/Current Liabilities)=__________
3. Calculate their gross profit margin ((Total Revenue-Cost of Revenue)/Total Revenue)= ________
4. Calculate their net profit margin (Net Income/Total Revenue)= __________
5. Calculate their total debt to total asset ratio (Total Debt/Total Assets)= __________
6. If their current price per share of common stock is $13.10, calculate their market capitalization (stock price x common shares outstanding)= __________
7. Stock analysts had estimated that Goodyear’s 4th quarter Total Revenue would be $5.9B. Explain why Goodyear’s stock price fell when the actual Total Revenue was announced on February 14th.
8. Goodyear’s sales were up 12% over the previous year’s 4th quarter, but their operating margin fell. What might explain this?
9. Most analysts are predicting Goodyear’s total revenues for the year beginning January 1, 2012, will be $24.53B. If sales for the next four quarters are the same as they have been for the past quarter, will Goodyear meet this estimate?
10. Is Goodyear Tire & Rubber Company financially healthy or sick? If you had $1400 today to invest in 100 shares of GT, would it be a good investment? What would you use to base your decision?

 

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