Problem 13-13B Common-Size Statements and Financial Ratios for Creditors [LO13-1
ID: 2598289 • Letter: P
Question
Problem 13-13B Common-Size Statements and Financial Ratios for Creditors [LO13-1, LO13-2, LO13-3, LO13-4] Crowley Building Supply sells various building materials to retail outlets. The company has just approached Sycamore State Bank requesting a $300,000 loan to strengthen the Cash account and to pay certain pressing short-term obligations. The company's financial statements for the most recent two years follow: Crowley Building Supply Comparative Balance Sheets This Year Last Year Assets Current assets Cash Marketable securities Accounts receivable, net nv Prepaid expenses $ 60,500 5,500 484,000 952,720 23,500 $145,500 23,500 296,000 592,610 30,500 Total current assets Plant and equipment, net 1,526,220 1,649,620 1,088,110 1,554,580 Total assets 3,175,840 2,642,690 Liabilities and Stockholders' Equity Liabilities Current liabilities Bonds payable, 8% $ 814,000 620,500 453,000 620,500 Total liabilities 1,434,500 1,073,500 Stockholders' equity: Preferred stock, $25 par, 7% Common stock, $10 par Retained earnings 326,000 518,000 897,340 326,000 518,000 725,190 Total stockholders' equity 1,741,340 1,569,190 Total liabilities and stockholders' Equity 3,175,840 2,642,690 Crowley Building Supply Comparative Income Statement and Reconciliation This Year Last Year Sales Cost of goods sold 5,037,000 3,881,400 $ 4,379,000 3,445,400 Gross margin Selling and administrative expenses 1,155,600 654,100 933,600 535,100 Net operating income Interest expense 501,500 49,640 398,500 49,640Explanation / Answer
we are supposed to solve first 4 parts when multiple are posted,
a) working capital= current assets-current liabilites
this year=1526220-814000=712220
last year=1088110-453000=635110
b)Current ratio=current assets/curent liabilites
This year=1526220/814000=1.87
Last year=1088110/453000=2.40
c)Acid test ratio=(current assets-inventory)/current liabilites
This year=(1526220-952720)/814000=0.7
Last year=(1088110-592610)/453000=1.09
d) Average collection period= 365*(avg acc rec/sales)
This year=365*((484000+296000)/5037000)
=56.5 days
last year=365*((296000+263000)/4379000)
=46.6 days