Income Stmt info: 2014 2015 Sales $ 1,050,000 $ 1,102,500 less Cost of Goods Sol
ID: 2740560 • Letter: I
Question
Income Stmt info:
2014
2015
Sales
$ 1,050,000
$ 1,102,500
less Cost of Goods Sold:
325,000
351,000
Gross Profit
725,000
751,500
Operating Expenses
575,000
609,500
Earnings before Interest & Taxes
150,000
142,000
Interest exp
25,000
30,000
earnings before Taxes
125,000
112,000
Taxes
50,000
44,800
Net Income
$ 75,000
$ 67,200
Balance Sheet info:
12/31/2014
12/31/2015
Cash
60,000
$ 57,000
Accounts Receivable
80,000
$ 80,800
Inventory
110,000
$ 121,000
Total Current Assets
$ 250,000
$ 258,800
Fixed Assets (Net)
$ 300,000
$ 318,000
Total Assets
$ 550,000
$ 576,800
Current Liabilities
$ 130,000
$ 149,500
Long Term Liabilities
$ 150,000
$ 140,000
Total Liabilities
$ 280,000
$ 289,500
Stockholder's Equity
$ 270,000
$ 287,300
Total Liab & Equity:
$ 550,000
$ 576,800
Compute each of the following ratios for 2014 and 2015 and
indicate whether each ratio was getting "better" or "worse" from 2014 to 2015
and was "good" or "bad" when compared to the Industry Avg in 2015
(round all numbers to 2 digits past the decimal place)
2014
2015
Getting Better or Getting Worse?
2015 Industry Avg
"Good" or "Bad" compared to Industry Avg
Profit Margin
0.11
Current Ratio
1.90
Quick Ratio
1.12
Return on Assets
.26
Debt to Assets
.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)
Income Stmt info:
2014
2015
Sales
$ 1,050,000
$ 1,102,500
less Cost of Goods Sold:
325,000
351,000
Gross Profit
725,000
751,500
Operating Expenses
575,000
609,500
Earnings before Interest & Taxes
150,000
142,000
Interest exp
25,000
30,000
earnings before Taxes
125,000
112,000
Taxes
50,000
44,800
Net Income
$ 75,000
$ 67,200
Balance Sheet info:
12/31/2014
12/31/2015
Cash
60,000
$ 57,000
Accounts Receivable
80,000
$ 80,800
Inventory
110,000
$ 121,000
Total Current Assets
$ 250,000
$ 258,800
Fixed Assets (Net)
$ 300,000
$ 318,000
Total Assets
$ 550,000
$ 576,800
Current Liabilities
$ 130,000
$ 149,500
Long Term Liabilities
$ 150,000
$ 140,000
Total Liabilities
$ 280,000
$ 289,500
Stockholder's Equity
$ 270,000
$ 287,300
Total Liab & Equity:
$ 550,000
$ 576,800
Explanation / Answer
Ans;
BUSI 320 Comprehensive Problem 1 Version C
Use the following information to answer the questions on page 2 below:
(note: all sales are credit sales)
Income Stmt info:
2013
2014
Sales
$ 1,050,000
$ 1,102,500
less Cost of Goods Sold:
325,000
351,000
Gross Profit
725,000
751,500
Operating Expenses
575,000
609,500
Earnings before Interest & Taxes
150,000
142,000
Interest exp
25,000
30,000
earnings before Taxes
125,000
112,000
Taxes
50,000
44,800
Net Income
$ 75,000
$ 67,200
Balance Sheet info:
12/31/2013
12/31/2014
Cash
60,000
$ 57,000
Accounts Receivable
80,000
$ 80,800
Inventory
110,000
$ 121,000
Total Current Assets
$ 250,000
$ 258,800
Fixed Assets (Net)
$ 300,000
$ 318,000
Total Assets
$ 550,000
$ 576,800
Current Liabilities
$ 130,000
$ 149,500
Long Term Liabilities
$ 150,000
$ 140,000
Total Liabilities
$ 280,000
$ 289,500
Stockholder's Equity
$ 270,000
$ 287,300
Total Liab & Equity:
$ 550,000
$ 576,800
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 was "good" or "bad" compared to the Industry Avg in 2014
(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 [=Net Income/Sales]
0.07
0.06
Worse
0.11
Bad
Current Ratio [=Current Assets/Current Liabilities]
1.92
1.73
Worse
1.90
Bad
Quick Ratio [=(Current assets-Inventories)/Current Liabilities]
1.08
0.92
Worse
1.12
Bad
Return on Assets [=net income/Total asset]
0.14
0.12
Worse
.26
Bad
Debt to Assets [=(Short term debt+ long term debt)/Total assets]
0.51
0.50
Worse
.55
Bad
Receivables turnover [=Net credit sales/Average accounts receivable]
13.13
13.65
Better
18.00
Bad
Avg. collection period* [=(Days*Average amount of Account receivable)/Credit sales]
27.43
26.38
Better
21.20
Bad
Inventory Turnover** [=Sales/Inventory]
9.55
9.11
Better
8.25
Bad
Return on Equity [=Net income/Shareholders’ equity]
0.28
0.23
Worse
0.25
Bad
Times Interest Earned [=EBIT/Interest charges]
5
4.73
Worse
8.15
Bad
*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)
Income Stmt info:
2013
2014
Sales
$ 1,050,000
$ 1,102,500
less Cost of Goods Sold:
325,000
351,000
Gross Profit
725,000
751,500
Operating Expenses
575,000
609,500
Earnings before Interest & Taxes
150,000
142,000
Interest exp
25,000
30,000
earnings before Taxes
125,000
112,000
Taxes
50,000
44,800
Net Income
$ 75,000
$ 67,200
Balance Sheet info:
12/31/2013
12/31/2014
Cash
60,000
$ 57,000
Accounts Receivable
80,000
$ 80,800
Inventory
110,000
$ 121,000
Total Current Assets
$ 250,000
$ 258,800
Fixed Assets (Net)
$ 300,000
$ 318,000
Total Assets
$ 550,000
$ 576,800
Current Liabilities
$ 130,000
$ 149,500
Long Term Liabilities
$ 150,000
$ 140,000
Total Liabilities
$ 280,000
$ 289,500
Stockholder's Equity
$ 270,000
$ 287,300
Total Liab & Equity:
$ 550,000
$ 576,800