Question

Nintendo Company, Ltd., reports the following financial information as of, or for the year ended, March 31, 2015. Nintendo reports its financial statements in both Japanese yen and U.S. dollars as shown (amounts in millions).

Current assets . . . . . . . . . . . . . . ¥1,097,597 $ 9,110

Total assets . . . . . . . . . . . . . . . . 1,352,944 11,229

Current liabilities . . . . . . . . . . . . 144,232 1,197

Net sales . . . . . . . . . . . . . . . . . . 549,780 4,562

Net income . . . . . . . . . . . . . . . . 41,843 347

1. Compute Nintendo’s current ratio, net profit margin, and sales-to-total-assets ratio using the financial information reported in (a) yen and (b) dollars. Round amounts to two decimals.

Short answer

Ratio	Yen	Dollars
Current Ratio	7.61 to 1	7.61 to 1
Net Profit Margin	7.61%	7.61%
Sales to total assets	0.41 times	0.41 times

Step-by-step solution

Meaning of Current Ratio

A current ratio can be described as a ratio used to estimate the business's proficiency in discharging its current debts using its current assets.

Computation of Ratios in yen

Calculation of current ratio

$$\begin{gathered} \mathbf{Current}\mathbf{}\mathbf{ratio}\mathbf{=}\frac{\mathbf{Current}\mathbf{}\mathbf{Assets}}{\mathbf{CurrentLiabilities}} \\ \mathbf{=}\frac{\mathbf{\yen }\mathbf{1}\mathbf{,}\mathbf{097}\mathbf{,}\mathbf{597}}{\mathbf{\yen }\mathbf{144}\mathbf{,}\mathbf{232}} \\ \mathbf{=}\mathbf{7}\mathbf{.}\mathbf{61}\mathbf{to}\mathbf{1} \end{gathered}$$

Calculation of net profit margin ratio

$$\begin{gathered} \mathbf{Net}\mathbf{}\mathbf{Profit}\mathbf{}\mathbf{Margin}\mathbf{=}\frac{\mathbf{Net}\mathbf{}\mathbf{Income}}{\mathbf{Net}\mathbf{}\mathbf{Sales}}\mathbf{\times }\mathbf{100} \\ \mathbf{=}\frac{\mathbf{\yen }\mathbf{41}\mathbf{,}\mathbf{843}}{\mathbf{\yen }\mathbf{549}\mathbf{,}\mathbf{780}}\mathbf{\times }\mathbf{100} \\ \mathbf{=}\mathbf{7}\mathbf{.}\mathbf{61}\mathbf{\%} \end{gathered}$$

Calculation of sales to total assets ratio

$$\begin{gathered} \mathbf{Sales}\mathbf{}\mathbf{to}\mathbf{}\mathbf{total}\mathbf{}\mathbf{assets}\mathbf{}\mathbf{ratio}\mathbf{=}\frac{\mathbf{Net}\mathbf{}\mathbf{sales}}{\mathbf{Total}\mathbf{}\mathbf{Assets}} \\ \mathbf{=}\frac{\mathbf{\yen }\mathbf{549}\mathbf{,}\mathbf{780}}{\mathbf{\yen }\mathbf{1}\mathbf{,}\mathbf{352}\mathbf{,}\mathbf{944}} \\ \mathbf{=}\mathbf{0}\mathbf{.}\mathbf{41}\mathbf{times} \end{gathered}$$

Computation of Ratios in dollar

Calculation of current ratio

$$\begin{gathered} \mathbf{Current}\mathbf{}\mathbf{ratio}\mathbf{=}\frac{\mathbf{Current}\mathbf{}\mathbf{Assets}}{\mathbf{Current}\mathbf{}\mathbf{Liabilities}} \\ \mathbf{=}\frac{\$\mathbf{9}\mathbf{,}\mathbf{110}}{\$\mathbf{1}\mathbf{,}\mathbf{197}} \\ \mathbf{=}\mathbf{7}\mathbf{.}\mathbf{61}\mathbf{to}\mathbf{1} \end{gathered}$$

Calculation of net profit margin ratio

$$\begin{gathered} \mathbf{Net}\mathbf{}\mathbf{Profit}\mathbf{}\mathbf{Margin}\mathbf{=}\frac{\mathbf{Net}\mathbf{}\mathbf{Income}}{\mathbf{Net}\mathbf{}\mathbf{Sales}}\mathbf{\times }\mathbf{100} \\ \mathbf{=}\frac{\$\mathbf{347}}{\$\mathbf{4}\mathbf{,}\mathbf{562}}\mathbf{\times }\mathbf{100} \\ \mathbf{=}\mathbf{7}\mathbf{.}\mathbf{61}\mathbf{\%} \end{gathered}$$

Calculation of sales to total assets ratio

$$\begin{gathered} \mathbf{Sales}\mathbf{}\mathbf{to}\mathbf{}\mathbf{total}\mathbf{}\mathbf{assets}\mathbf{}\mathbf{ratio}\mathbf{=}\frac{\mathbf{Net}\mathbf{}\mathbf{sales}}{\mathbf{Total}\mathbf{}\mathbf{Assets}} \\ \mathbf{=}\frac{\$\mathbf{4}\mathbf{,}\mathbf{562}}{\$\mathbf{11}\mathbf{,}\mathbf{229}} \\ \mathbf{=}\mathbf{0}\mathbf{.}\mathbf{41}\mathbf{times} \end{gathered}$$