Business Problem Solving--NEED TONIGHT
econheypt01
business_hw.docxBUSI 320 Comprehensive Problem 1
Use the following information to answer the questions on page 2 below:
(note: all sales are credit sales)
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Income Stmt info: |
2013 |
2014 |
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Sales |
$ 1,000,000 |
$ 1,050,000 |
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less Cost of Goods Sold: |
400,000 |
424,000 |
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Gross Profit |
600,000 |
626,000 |
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Operating Expenses |
350,000 |
365,750 |
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Earnings before Interest & Taxes |
250,000 |
260,250 |
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Interest exp |
25,000 |
25,500 |
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Earnings before Taxes |
225,000 |
234,750 |
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Taxes |
90,000 |
93,900 |
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Net Income |
$ 135,000 |
$ 140,850 |
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Balance Sheet info: |
12/31/2013 |
12/31/2014 |
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Cash |
25,000 |
$ 30,000 |
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Accounts Receivable |
50,000 |
$ 51,000 |
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Inventory |
125,000 |
$ 137,500 |
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Total Current Assets |
$ 200,000 |
$ 218,500 |
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Fixed Assets (Net) |
$ 300,000 |
$ 315,000 |
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Total Assets |
$ 500,000 |
$ 533,500 |
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Current Liabilities |
$ 110,000 |
$ 117,700 |
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Long Term Liabilities |
$ 180,000 |
$ 183,000 |
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Total Liabilities |
$ 290,000 |
$ 300,700 |
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Stockholder's Equity |
$ 210,000 |
$ 232,800 |
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Total Liab & Equity: |
$ 500,000 |
$ 533,500 |
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Compute each of the following ratios for 2013 and 2014 and |
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indicate whether each ratio was getting "better" or "worse" from 2013 to 2014 |
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and was "good" or "bad" compared to the Industry Avg in 2014 |
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(round all numbers to 2 digits past the decimal place) |
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2013 |
2014 |
Getting Better or Getting Worse? |
2014 Industry Avg |
"Good" or "Bad" compared to Industry Avg |
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Profit Margin |
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0.11 |
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Current Ratio |
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1.90 |
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Quick Ratio |
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0.66 |
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Return on Assets |
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.28 |
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Debt to Assets |
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.50 |
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Receivables turnover |
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18.00 |
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Avg. collection period* |
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21.20 |
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Inventory Turnover** |
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8.25 |
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Return on Equity |
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0.55 |
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Times Interest Earned |
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11.15 |
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*Assume a 360 day year |
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**Inventory Turnover can be computed 2 different ways. Use the formula listed in the text |
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(the one the text indicates many credit reporting agencies generally use) |
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