| Wilmington - 305 - Test 1 (b) - Ratios |
| | | | | | PLEASE NOTE THAT FOR THE DSO RATIO USE 360 DAYS AS OPPOSED TO 365 |
| Name |
| 1) | Construct the Current Assets section of the Balance Sheet from the following: |
| | | Sales (Credit) | | 720,000 |
| | | Gross Profit ( 10% of Sales ) |
| | | Inventory Turnover | | 6x |
| | | Current Ratio | | 2x |
| | | Current Liabilities | | 105,000 |
| | | Average Collection Period | | 35 days |
| 2) | Given the following information & ratios , assemble a Balance Sheet |
| | | Debt/Equity | | 1.6x |
| | | Working Capital | | 100,000 |
| | | DSO | | 13.5 days |
| | | Inventory Turnover | | 12x |
| | | Sales ( all on credit ) | | 2,000,000 |
| | | Gross Profit ( 10% of Sales ) |
| | | Cash | | 50,000 |
| | | Current Debt is 43.75% of Total Debt |
| | Assets | | | Liabilities & Stockholders Equity |
| | Cash | | | Total Current Liabilities |
| | A/R | | | Long term Liabilities |
| | Inventory |
| | Total Current Assets | | | Total Liabilities |
| | Net Plant & Equipment | | | Total Stockholders Equity |
| | Total Assets | | | Total Debt & Stockholders Equity |
| 3) | Construct the following Balance Sheet from the following: |
| | DSO | | 15 days |
| | Investors own 25% of the assets. |
| | Sales | | 3,600,000 |
| | Inventory Turnover | | 9.36x |
| | Cost of Goods Sold | | 91% of Sales |
| | Quick Ratio | | 1.4X |
| | Fixed Assets are 30% of the Total Assets |
| | Fixed Assets total $300,000 |
| | Assets | | | Liabilities |
| | Cash | | | Current Debt |
| | A/R | | | Long Term Debt |
| | Inv |
| | | | | Total Debt |
| | Total Current |
| | Fixed Assets |
| | Total Assets | | | Net Worth |
| 4) | Given the following information , please answer the following for the '02 & '03 years. |
| | As a given , assume the company extends 15 day terms on receivables |
| | and the industry median for Profit margin is 2% ; for current ratio is 1.5x |
| | Use ratios to support your answers |
| | (a) If one of the bank covenants requires a maximum Debt/Equity ratio of 2x; were they in |
| | compliance for the '03 year. If so how much more could they borrow. |
| | (b) Comment on the company's performance relative to their collection of receivables |
| | © Did the company meet their stated goal of a return to shareholders of 20% |
| | d) What would the profit in '02 have been in the budget called for a profit margin of 4.5% |
| | e) Comment on the Company's Liquidity position |
| | | | ABC Company |
| | | | Income Statement |
| | | For the years ended December 31 , 2002 & December 31,2003 |
| | | | 12/31/02 | | 12/31/03 |
| | Sales | | 5,000,000 | | 5,500,000 |
| | COGS | | 4,250,000 | | 4,675,000 |
| | Gross Profit | | 750,000 | | 825,000 |
| | S & G Exp | | 500,000 | | 550,000 |
| | Depreciation | | 50,000 | | 75,000 |
| | EBIT | | 200,000 | | 200,000 |
| | Interest | | 25,000 | | 20,000 |
| | EBT | | 175,000 | | 180,000 |
| | Gain /Loss on sale of Assets | | 0 | | (150,000) |
| | Taxes | | 70,000 | | 12,000 |
| | EAT | | 105,000 | | 18,000 |
| | Dividends | | 1,000 | | 1,000 |
| | | | | ABC Company |
| | | | | Balance Sheet |
| | | | 12/31/02 | | 12/31/03 |
| | Current Assets: |
| | Cash | | 125,000 | | 25,000 |
| | A/R | | 225,000 | | 675,000 |
| | Inventory | | 100,000 | | 150,000 |
| | Total Current Assets | | 450,000 | | 850,000 |
| | Net Plant & Equipment | | 500,000 | | 450,000 |
| | Total Assets | | 950,000 | | 1,300,000 |
| | Current Liabilities |
| | A/P | | 200,000 | | 250,000 |
| | Accrued Expenses | | 100,000 | | 50,000 |
| | Total Current Liabilities | | 300,000 | | 300,000 |
| | Long term Liabilities | | 325,000 | | 558,000 |
| | Total Liabilities | | 625,000 | | 858,000 |
| | Stockholders Equity |
| | Common Stock | | 10,000 | | 30,000 |
| | Capital in excess of Par | | 65,000 | | 145,000 |
| | Retained Earnings | | 250,000 | | 267,000 |
| | Total Stockholders Equity | | 325,000 | | 442,000 |
| | Total Liabilties & Stockholders Equity | | 950,000 | | 1,300,000 |
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finance-305---test-1b.xls
