Question #2 The following income statement and balance sheet for The Athletic At
ID: 2590304 • Letter: Q
Question
Question #2
The following income statement and balance sheet for The Athletic Attic are provided. THE ATHLETIC ATTIC Income Statement For the year ended December 31, 2015 Net sales Cost of goods sold $8,900,000 5,450,000 Gross profit 3,450,000 Operating expenses Depreciation expense Interest expense Income tax expense $1,600,000 210,000 50,000 360,000 Total expenses 2,220,000 Net income S 1,230,000 THE ATHLETIC ATTIC Balance Sheet December 31 2015 2014 Assets Current assets Cash Accounts receivable Inventory Supplies $164,000 $214,000 810,000 1,405,000 1,075,000 85,000 790,000 110,000 Long-term assets Equipment Less: Accumulated depreciation 1,150,000 ,150,000 (420,000) (210,000) Total assets $3,199,000 $3,124,000 Liabilities and Stockholders' Equity Current liabilities: Accounts payable Interest payable Income tax payable $115,000 91,000 5,000 31,000 40,000 600,000 700,000 Long-term liabilities: Notes payable 600,000 Stockholders' equity: Common stock Retained earnings 700,000 1,744,000 1,697,000 Total liabilities and stockholders' equity $3,199,000 $3,124,000
Explanation / Answer
1
Receivables turnover ratio
Net sales/ Average receivables
8900000/800000
11.125
times
Average receivables
2014
810000
2015
790000
Average
800000
2
Average collection period:
365/ receivables turnover ratio
365/11.125
32.81
days
3
Inventory turnover ratio
Cost of goods sold/ Average inventory
5450000/1240000
4.40
Average inventory
2014
1075000
2015
1405000
Average
1240000
4
Average days in inventory
365/ inventory turnover ratio
365/4.395
83.05
days
5
Current ratio
Cash
164000
Accounts receivable
790000
Inventory
1405000
Supplies
110000
(A)
2469000
Accounts Payable
115000
Income tax Payable
40000
(B)
155000
(A/B)
15.92903
6
Acid test ratio
Cash
164000
Accounts receivable
790000
Supplies
110000
(A)
1064000
Accounts Payable
115000
Income tax Payable
40000
(B)
155000
(a/b)
6.86
7
Debt to equity ratio
600000/2444000
0.25
8
Times interest earned ratio
EBIT/ Interest expense
(1230000-50000)/1230000
0.96
1
Gross profit ratio
Gross profit / Sales
3450000/8900000
39%
2
Return on assets
Net income/ Average total assets
1230000/3161500
39%
3
Profit Margin
Net Income/ Sales
1230000/8900000
14%
4
Asset turnover
Net sales/Average Total Assets
8900000/3161500
2.815119405
5
Return on equity
1230000/2420500
0.508159471
6
Price earning ratio
MPS/EPS
$22.42/1.36
16.47794118
Risk Ratios
1
Receivable turnover ratio
11.125
2
Average collection period
32.81
3
Inventory turnover ratio
4.40
4
Average days in inventory
83.05
5
Current ratio
15.92903
6
Acid test ratio
6.86
7
Debt to equity ratio
0.25
8
Times interest earned ratio
0.96
Profitability ratio
1
Gross profit Ratio
39%
2
Return on assets
39%
3
Profit Margin
14%
4
Asset turnover
2.815119
5
Return on equity
51%
6
Price earnings ratio
16.47794
1
Receivables turnover ratio
Net sales/ Average receivables
8900000/800000
11.125
times
Average receivables
2014
810000
2015
790000
Average
800000
2
Average collection period:
365/ receivables turnover ratio
365/11.125
32.81
days
3
Inventory turnover ratio
Cost of goods sold/ Average inventory
5450000/1240000
4.40
Average inventory
2014
1075000
2015
1405000
Average
1240000
4
Average days in inventory
365/ inventory turnover ratio
365/4.395
83.05
days
5
Current ratio
Cash
164000
Accounts receivable
790000
Inventory
1405000
Supplies
110000
(A)
2469000
Accounts Payable
115000
Income tax Payable
40000
(B)
155000
(A/B)
15.92903
6
Acid test ratio
Cash
164000
Accounts receivable
790000
Supplies
110000
(A)
1064000
Accounts Payable
115000
Income tax Payable
40000
(B)
155000
(a/b)
6.86
7
Debt to equity ratio
600000/2444000
0.25
8
Times interest earned ratio
EBIT/ Interest expense
(1230000-50000)/1230000
0.96