BUSI 320 Comprehensive Problem 1 Summer 2019
Use the following information to answer the questions below:
note: all sales are credit sales
Income Stmt info: 2017 2018
Sales 1,100,000$ 1,155,000$
less Cost of Goods Sold: 325,000 351,000
Gross Profit 775,000 804,000
Operating Expenses 575,000 609,500
Earnings before Interest & Taxes 200,000 194,500
Interest exp 25,000 30,000
earnings before Taxes 175,000 164,500
Taxes 70,000 65,800
Net Income 105,000$ 98,700$
Balance Sheet info: 12/31/2017 12/31/2018
Cash 55,000 52,250$
Accounts Receivable 110,000 111,100$
Inventory 80,000 88,000$
Total Current Assets 245,000$ 251,350$
Fixed Assets (Net) 350,000$ 371,000$
Total Assets 595,000$ 622,350$
Current Liabilities 140,000$ 161,000$
Long Term Liabilities 150,000$ 155,000$
Total Liabilities 290,000$ 316,000$
Stockholder's Equity 305,000$ 306,350$
Total Liab & Equity: 595,000$ 622,350$
GRADING GUIDELINES:
(round all numbers to 2 digits past the decimal place)
Each of the computed ratios is worth 1 point (10 ratios * 2 years = 20 points)
partial credit may be given if student shows work and made a math mistake
(Ex: 20/40 = .6)
Each comparison is worth 1/2 point (10 ratios * 2 comparisons = 10 points)
Comparisons should be graded on the basis of the student's computed answers
(Ex: if student computed profit margins of .51 and .53 then their comparisons
should be "getting better" and "Good")
Ratios
2017
2018
Getting Better
or Getting
Worse?
2018
Industry
Avg
Profit Margin
0.08
Current Ratio
1.90
Quick Ratio 1.12
Return on Assets
0.15
Debt to Assets
0.55
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)
"Good" or
"Bad"
compared
to
Industry
Avg
FORMULAS:
Net Income/Sales
Current Assets / Current Liabilities
(Current Assets - Inventory)/Current Liabilities
Net Income/Total Assets
Total Liabilities/Total Assets
Sales/Accounts Receivable
Accounts Receivable/(Sales/360) OR 360/Receivables Turnover
Sales / Inventory
Net Income / Stockholder's Equity
Earnings before interest and taxes / interest expense
