Textbook Assignment 1
–
Comprehensive Problem 1
Use the following information to answer the questions below:
note: all sales are credit sales
Income Stmt info: 2014 2015
Sales 1,050,000$ 1,181,250$
less Cost of Goods Sold: 325,000 346,125
Gross Profit 725,000 835,125
Operating Expenses 575,000 609,500
Earnings before Interest & Taxes 150,000 225,625
Interest exp 25,000 31,000
earnings before Taxes 125,000 194,625
Taxes 50,000 77,850
Net Income 75,000$ 116,775$
Balance Sheet info: 12/31/2014 12/31/2015
Cash 60,000 63,600$
Accounts Receivable 80,000 87,200$
Inventory 110,000 122,100$
Total Current Assets 250,000$ 272,900$
Fixed Assets (Net) 300,000$ 312,000$
Total Assets 550,000$ 584,900$
Current Liabilities 130,000$ 149,500$
Long Term Liabilities 150,000$ 170,000$
Total Liabilities 280,000$ 319,500$
Stockholder's Equity 270,000$ 265,400$
Total Liab & Equity: 550,000$ 584,900$
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 whether the 2015 ratio was "good" or "bad" compared to the Industry Avg
(round all numbers to 2 digits past the decimal place)
2014 2015
Getting
Better or
Getting
Worse?
2015
Industry
Avg
Profit Margin
0.07
0.10
Better
0.09
Current Ratio
1.92
1.83
Worse
1.80
Quick Ratio 1.08 1.01 Worse 1.12
Return on Assets
0.14
0.20
Better
0.18
Debt to Assets
0.51
0.55
Worse
0.49
Receivables turnover
13.13
13.55
Better
12.00
Avg. collection period*
27.43
26.58
Better
22.10
Inventory Turnover**
9.55
9.67
Better
8.25
Return on Equity
0.28
0.44
Better
0.35
Times Interest Earned
6.00
7.28
Better
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)
"Good" or
"Bad"
compared
to
Industry
Avg
Good
Good
Bad
Good
Bad
Good
Bad
Good
Good
Bad
