Please help me solve these equations. Please show your work so that I can learn.
ID: 2631246 • Letter: P
Question
Please help me solve these equations. Please show your work so that I can learn.
Gross profit margin = 70% Inventory turnover ratio = 5 times Sales = $4,000 Net profit margin = 5% Average collection period = 45 days Return on equity = 50% Return on assets = 20% Cash = $75 Current ratio = 2.50 times Accounts payable days = 30 days
Note: Of total sales, 80 percent are on credit and the remainder are cash sales. Assume a 360-day year.
Cash __________ Notes payable __________ Accounts receivable __________ Accounts payable __________ Inventory __________ Long-term debt __________ Net fixed assets __________ Equity __________ Total assets __________ Total liab. & equity __________Explanation / Answer
Please see below
Sales $4,000
Cash $75
Gross profit margin 70%
(Sales - COGS) / Sales = Gross Profit Margin
(4,000 - COGS) / 4,000 = 70%
COGS = $1,200
Inventory turnover ratio 5 times
COGS / Average Inventory = Inventory Turnover
1,200 / Average Inventory = 5
Average Inventory = 240
Net profit margin 5%
Net Income / Sales = Net Profit Margin
Net Income / 4,000 = 5%
Net Income = 200
Average collection period 45 days
4,000 x 80% = 3,200
(Days x A/R) / Credit Sales = Average Collection Period
(360 x A/R) / 3,200 = 45
Accounts Receivable = 400
Return on equity 50%
Net Income / Equity = ROE
200 / Equity = 50%
Equity = 400
Return on assets 20%
Net Income / Assets = ROA
200 / Assets = 20%
Assets = 1,000
Accounts payable days 30 days
(Accounts Payable / COGS) x Days = Accounts Payable Days
(Accounts Payable / 1,200) x 360 = 30
Accounts Payable = 100
Current ratio 2.50 times
Cash + Accounts Receivable + Inventory = Current Assets
75 + 400 + 240 = 715
Current Assets / Current Liabilities = Current Ratio
715 / Current Liabilities = 2.50
Current Liabilities = 286
Of total sales, 80 percent are on credit and the remainder are cash sales. Assume a 360-day year. Find the following:
Cash $75 (Given)
Accounts receivable $400 (from ratio)
Inventory $240 (from ratio)
Total assets $1,000 (from ratio)
Net fixed assets $285 (1,000 Total Assets - 240 Inv. - 400 A/R - 75 Cash)
Accounts payable $100 (from ratio)
Notes payable $186 (286 current liabilities from ratio - 100 A/P)
Equity $400 (from ratio)
Long-term debt $314
Basic Accounting Equation
Assets = Liabilities + Equity
1,000 = Liabilities + 400
Liabilities = $600
600 - 286 current liabilities = 314 L/T Liabilities
Thank you