In its closing financial statements for its first year in business, ABC Enterpri
ID: 2773940 • Letter: I
Question
In its closing financial statements for its first year in business, ABC Enterprises, had cash of $242, accounts receivable of $850, inventory of $820, net fixed assets of $3,408, accounts payable of $700, short-term notes payable of $740, long-term liabilities of $1,100, common stock of $1,160, retained earnings of $1,620, net sales of $2,768, cost of goods sold of $1,210, depreciation of $360, interest expense of $160, taxes of $312, addition to retained earnings of $508, and dividends paid of $218.
Calculate the following:
Return on equity
Return on total assets
Net profit margin
Gross profit margin
Sales to asset ration
Current Ratio
Total-debt-total-asset ratio
Debt-to-equity ratio
Equity multiplier
Interest coverage ratio
Explanation / Answer
Gross profit = $2,768-$1,210 = $1,558
Net profit = $1,558-$360-$160-$312 = $726
Total assets = $242+$850+$820+$3,408 = $5,320
Return on equity:
= Net income÷Share holders funds
= $726÷($1,160+$1,620)
= 26.12%
Return on total assets:
= Gross profit÷total assets
= $726÷$5,320
= 13.65%
Net profit margin:
= net profit÷Sales
= $726÷$2,768
= 26.23%
Gross profit margin:
= Gross profit÷Sales
= $1,558÷$2,768
= 56.29%
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