Comprehensive Problem
Use the following information to answer the questions below: note: all sales are credit sales
| Income Stmt info: |
2013 |
2014 |
| Sales |
$ 1,050,000 |
$ 1,128,750 |
| less Cost of Goods Sold: |
325,000 |
346,125 |
| Gross Profit |
725,000 |
782,625 |
| Operating Expenses |
575,000 |
609,500 |
| Earnings before Interest & Taxes |
150,000 |
173,125 |
| Interest exp |
25,000 |
29,000 |
| earnings before Taxes |
125,000 |
144,125 |
| Taxes |
50,000 |
57,650 |
| Net Income |
$ 75,000 |
$ 86,475 |
|
|
|
| Balance Sheet info: |
12/31/2013 |
12/31/2014 |
| Cash |
60,000 |
$ 66,000 |
| Accounts Receivable |
80,000 |
$ 83,200 |
| Inventory |
110,000 |
$ 119,900 |
| Total Current Assets |
$ 250,000 |
$ 269,100 |
| Fixed Assets (Net) |
$ 300,000 |
$ 318,000 |
| Total Assets |
$ 550,000 |
$ 587,100 |
|
|
|
| Current Liabilities |
$ 130,000 |
$ 136,500 |
| Long Term Liabilities |
$ 150,000 |
$ 170,000 |
| Total Liabilities |
$ 280,000 |
$ 306,500 |
| Stockholder's Equity |
$ 270,000 |
$ 280,600 |
| Total Liab & Equity: |
$ 550,000 |
$ 587,100 |
Compute each of the following ratios for 2013 and 2014 and indicate whether each ratio was getting "better" or "worse" from 2013 to 2014 and whether the 2014 ratio was "good" or "bad" compared to the Industry Avg (round all numbers to 2 digits past the decimal place)
|
2013 |
2014 |
Getting Better or Getting Worse? |
2014 Industry Avg |
"Good" or "Bad" compared to Industry Avg |
| Profit Margin |
|
|
|
0.11 |
|
| Current Ratio |
|
|
|
1.90 |
|
| Quick Ratio |
|
|
|
1.12 |
|
| Return on Assets |
|
|
|
0.26 |
|
| Debt to Assets |
|
|
|
0.55 |
|
| Receivables turnover |
|
|
|
18.00 |
|
| Avg. collection period* |
|
|
|
21.20 |
|
| Inventory Turnover** |
|
|
|
8.25 |
|
| Return on Equity |
|
|
|
0.25 |
|
| Times Interest Earned |
|
|
|
8.15 |
|
*Assume a 360 day year
**Inventory Turnover can be computed 2 different ways. Use the formula listed in the text (the one the text indicates many credit reporting agencies generally use)