BUSI 320 Comprehensive Problem 1 Version FALL
Use the following information to answer the questions below:
note: all sales are credit sales
Income Stmt info: 2019 2020
Sales 800,000$ 880,000$
less Cost of Goods Sold: 220,000 240,000
Gross Profit 580,000 640,000
Operating Expenses 480,000 505,000
Earnings before Interest & Taxes 100,000 135,000
Interest exp 25,000 25,000
earnings before Taxes 75,000 110,000
Taxes 25,000 30,000
Net Income 50,000$ 80,000$
Balance Sheet info: 12/31/2019 12/31/2020
Cash 60,000 65,000$
Accounts Receivable 90,000 95,000$
Inventory 110,000 130,000$
Total Current Assets 260,000$ 290,000$
Fixed Assets (Net) 300,000$ 330,000$
Total Assets 560,000$ 620,000$
Current Liabilities 130,000$ 140,000$
Long Term Liabilities 170,000$ 200,000$
Total Liabilities 300,000$ 340,000$
Stockholder's Equity 260,000$ 280,000$
Total Liab & Equity: 560,000$ 620,000$
Compute each of the following ratios for 2019 and 2020 and
indicate whether each ratio was getting "better" or "worse" from 2019 to 2020
and whether the 2020 ratio was "good" or "bad" compared to the Industry Avg
(round all numbers to 2 digits past the decimal place)
2019 2020
Getting
Better or
Getting
Worse?
2020
Industry
Avg
Profit Margin
0.06
0.09
Better
0.08
Current Ratio
2.00
2.07
Better
1.80
Quick Ratio 1.15 1.14 Better 1.12
Return on Assets
0.09
0.13
Better
0.18
Debt to Assets
0.54
0.55
Worse
0.60
Receivables turnover
8.89
9.26
Better
12.00
Avg. collection period*
40.5
38.86
Better
22.10
Inventory Turnover**
7.27
6.77
Worse
8.25
Return on Equity
0.19
0.29
Better
0.16
Times Interest Earned
4
5.40
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
Good
Bad
Bad
Bad
Bad
Bad
Good
Bad
