Question

Use tables 1 and 2 to answer the following questions, partial credit awarded as merited. Don't worry about numerical formatting (i.e. $ or %).

Table 1. Balance Sheet

	Dollars		Dollars
Cash	$119,776	Bank Note	$10,400
Accounts Receivable	$82,796	Emergency Loan	$0
Inventory	$24,435
Investments	$70,000
Current Assets	$297,007	Current Liabilities	$10,400
Fixed Assets
Trucks	$187,250	Non-Current Liabilities	$391,846
Storage Facilities	$286,740
Non-Current Assets	$473,990
Total Assets	$770,997	Net Worth	$368,751
		Liabilities and Net Worth	$770,997

Table 2. Income Statement

Sales	Dollars	% of Sales
Complete Feed	$1,169,951	45.18%
Concentrate Feed	$616,165	23.79%
Comm Grade Fert	$305,843	11.81%
Custom Blend Fert	$497,563	19.21%
Total	$2,589,522	100.00%
COGS
Complete Feed	$900,724
Concentrate Feed	$497,053
Comm Grade Fert	$205,438
Custom Blend Fert	$331,096
Total	$1,934,311	74.70%
Gross Margin
Complete Feed	$269,227
Concentrate Feed	$119,112
Comm Grade Fert	$100,405
Custom Blend Fert	$166,467
Total	$655,211	25.30%
Operating Expenses
Storage – FC	$21,240	0.82%
Storage – VC	$162,626	6.28%
Storage Rental	$6,151	0.24%
Truck – FC	$40,250	1.55%
Truck – VC	$91,070	3.52%
Truck Rental	$4,109	0.16%
Manager’s Salary	$50,000	1.93%
Labor	$226,250	8.74%
Overtime	$0	0.00%
Bad Debt Loss	$4,510	0.17%
Advertising	$4,000	0.15%
Other Expenses	$19,208	0.74%
Total Expenses	$629,414	24.31%
Net Operating Profit	$25,797	1.00%
Other Income	1200	0.05%
Interest Expense	$18,143	0.70%
Pre-Tax Profit	$8,854	0.34%

What are net sales for this firm (to the nearest whole dollar)?

What is the asset turnover ratio for this firm (round to two places after the decimal)?

What is the inventory turnover ratio (round to two places after the decimal)?

What is the debt to equity ratio (round to two places after the decimal)?

Calculate the contribution to overhead (contribution margin or CTO) for the firm (round to three places after the decimal).

What are the breakeven sales level for the firm (round to nearest whole cent)?

Is the firm reaching its breakeven sales? Yes/No

The firm wants to set a profit goal of $10,000. What is the new, aggregate level of breakeven sales needed to reach this profit goal using the CTO value you calculated previously (round to nearest whole cent)?

Answer 1

a. net sales = gross sales - sales returns - discounts

no information has been given about sales returns and discounts. so, total sales is equal to net sales in this case.

net sales for this firm are total sales of $2,589,522.

b. asset turnover ratio = Net sales/average total assets

for average total assets, we need total assets for current as well as previous year. but we have total assets only for one year. so, we will use it in place of average total assets.

asset turnover ratio = $2,589,522/$770,997 = 3.36

c. inventory turnover ratio = Cost of goods sold or COGS/Average inventory

for average inventory, we need inventory for current as well as previous year. but we have inventory only for one year. so, we will use it in place of average inventory.

inventory turnover ratio = $1,934,311/$24,435 = 79.16

d. debt to equity ratio = (Bank note + Non-current liabilities)/Net worth

debt to equity ratio = ($10,400 + $391,846)/$368,751 = $402,246/$368,751 = 1.09