Assignment
1. Given the profit loss (income statement) and balance sheet for Sam's Sandwich Delivery (Table 4-8), answer the following:
a. Calculate the following ratios: current, quick, accounts receivable turnover, fixed asset turnover.
• Current ratio= current assets / current liabilities
= 28,253 / 10,659
= 2.659
• Quick ratio = current assets-inventory-prepaid expenses /current liability
= 28,253-2,607-0 / 10,659
= 2.47
• Account receivable turnover = net credit sales / average account receivable
= 172,700 / 6843
=25.249
• Fixed assets turnover =net sales /average fixed assets
= 172,700 / 20,351
= 8.499
b. Using the inventory figure on the balance sheet as average inventory, calculate the inventory turnover ratio.
• Inventory turnover ratio = cost of goods sold / average inventory
= 52,067 / 2607
= 19.979
c. Calculate the debt-to-equity ratio, debt-to-total asset ratio, and operating profit margin ratio.
• Debt-to-equity ratio = total liabilities / total equity
= 29,285 / 19,319
= 1.515
• Debt-to-total asset ratio = total liabilities / total assets
= 29,285 / 48,604
=0.603
• Operating profit margin ratio = operating income /net sales
=9,516 / 172,700
= 0.055
d. Perform a vertical analysis of the income statement.
e. Perform a vertical analysis of the balance sheet.
f. Based on your analysis, would you consider investing in Sam's Sandwich Delivery?
Ans: based on my analysis ,I wouldn't consider investing in sam's sandwich delivery because the net profit margin is too low.
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Table 4-8 Financial Statements for Sam's Sandwich Delivery
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Profit Loss (Income Statement) for Six Months Ending 06-30-2013
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Revenues
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Retail Sales
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$68,283
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Wholesale Sales
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104,417
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Total Revenues
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$172,700
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Cost of Sales
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52,067
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Gross Profit
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$120,633
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Total Operating Expenses
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111,117
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Operating Profit
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$ 9,516
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Other Income/Expenses
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Interest Income
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41
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Interest Expense
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(651)
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Depreciation-Store Equipment
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(292)
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Total Other Income/Expenses
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(902)
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Net Profit
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$ 8,614
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Balance Sheet as of 06-30-2013
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Assets
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Current Assets
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Change Fund
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$ 569
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Cash in Bank-Checking
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8,612
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Cash in Bank-Savings
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9,622
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Accounts Receivable
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6,843
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Inventories
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2,607
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Total Current Assets
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$ 28,253
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Fixed Assets
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Furniture and Fixtures
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4,296
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Less: Accum Depreciation
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4,110
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186
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Equipment
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68,293
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Less: Accum Depreciation
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67,725
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568
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Transportation Equipment
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31,168
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Less: Accum Depreciation
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11,571
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19,597
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Total Fixed Assets
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$ 20,351
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Total Assets
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$ 48,604
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Current Liabilities
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Accounts Payable Trade
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6,208
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Accrued Payroll Taxes
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3,464
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Accrued Sales Taxes
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987
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Total Current Liabilities
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$ 10,659
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Long-Term Liabilities
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Auto Loans Payable
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18,626
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Total Long-Term Liabilities
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$ 18,626
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Total Liabilities
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$ 29,285
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Stockholder's Equity
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Common Stock
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83,081
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Retained Earnings
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(72,376)
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Net Profit/Loss
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8,614
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Total Equity
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19,319
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Total Liabilities and Equity
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$ 48,604
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