Question

In: Finance

Accounts Receivable 250,000 Accounts Payable 260,000 Capital Surplus 100,000 Cash 190,000 Common Stock 300,000 Costs 640,000...

Accounts Receivable 250,000 Accounts Payable 260,000 Capital Surplus 100,000 Cash 190,000 Common Stock 300,000 Costs 640,000 Depreciation Expense 40,000 Dividends 97,500 Net Furniture & Fixtures 200,000 Goodwill 180,000 Interest Expense 50,000 Inventory 175,000 Land 305,000 Line of Credit (used) 200,000 Long Term Loan 340,000 Retained Earnings 100,000 Sales 980,000 Tax rate 21% Shares outstanding 15,000

Find Ratios:

Current Ratio 1.34

Total Debt Ratio .615

Earnings Per Share 13.17

Payables Turnover 2.46

Book Value Per Share 33.33

Days Sales in Payables 148.37

Trying to find out if I'm on the right track.

Solutions

Expert Solution

Answer:

Yes, all your ratios appear correct.

From given information, let us construct the balance sheet as follows:

Net Income = (Sales - (Costs + Depreciation + Interest expense)) * (1 - tax rate)

= (980,000 - (640,000 + 40,000 + 50,000)) * (1 - 21%) = $197,500

Current Ratio = Current asset /Current liabilities = 615000 / 460000 = 1.34

Total Debt Ratio = Total liabilities /Total assets = 800000 / 1300000 = 0.615

Earnings Per Share = Net Income / Number of shares outstanding = 197500 / 15000 = $13.17

Payable Turnover = COGS / Accounts payable = 640000 /260000 = 2.46

Book value per share = Stockholders' equity / Number of shares outstanding = 500000 / 15000 = $33.33

Days Sales in Payables = 365 / Payable Turnover = 365 / 2.46 = 148 days

Hence:

Current Ratio = 1.34

Total Debt Ratio = 0.615

Earnings Per Share = $13.17

Payable Turnover = 2.46

Book value per share = $33.33

Days Sales in Payable = 148 days

jeff jeffy answered 2 months ago

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