Question

Ratio Analysis

Byers Company presents the following condensed income statement for 2019 and condensed December 31, 2019, balance sheet:

Income Statement
Sales (net)			$267,000
Less:
Cost of goods sold	$160,000
Operating expenses	62,000
Interest expense	11,000
Income taxes	10,000
Total expenses			(243,000)
Net income			$24,000

Balance Sheet
Cash	$10,000		Current liabilities	$40,000
Receivables (net)	22,000		Bonds payable, 10%	110,000
Inventory	56,000		Common stock, $10 par	100,000
Long-term investments	30,000		Additional paid-in capital	95,000
Property and equipment (net)	282,000		Retained earnings	55,000
Total Assets	$400,000		Total Liabilities and Shareholders' Equity	$400,000

Additional information:

1. The company's common stock was outstanding the entire year.
2. Dividends of $1.50 per share on the common stock were declared in 2019.
3. On December 31, 2019, common stock is selling for $20 per share.
4. On January 1, 2019, the accounts receivable (net) balance was $24,000, total assets amounted to $380,000, and total shareholders' equity was $241,000.
5. Of the company's net sales, 78% are on credit.
6. The company operates on a 365-day business year.

Required

On the basis of the preceding information, compute the following ratios for the Byers Company:

(Round to two decimal places.)

1. Earnings per share:
2. Gross profit margin:
3. Operating profit margin:
4. Net profit margin:
5. Total asset turnover:
6. Return on assets (Round tax rate to the nearest whole percent in your intermediate calculations.)
7. Return on common equity
8. Receivables turnover (in days): (Round your intermediate calculation to two decimal places.)
9. Interest coverage: (in times)

Answer 1

	Ratio Analysis
			Note	Amount $
	Sales	A		267,000
	Cost of Goods sold	B		160,000
	Operating Expenses	C		62,000
	Operating Profit Before Interest and Taxes (EBIT)	D	A-B-C	45,000
	Interest Expenses	E		11,000
	Operating Profit Before Taxes	F	D-E	34,000
	Income Taxes	G		10,000
	Net Operating Profit After Taxes	H	F-G	24,000
	No of Shares- Common Stock, $ 10 Par	I		10,000
	Total Assets - Closing Balance	J		400,000
	Total Assets - Opening Balance	K		380,000
	Average Total Assets	L	(J+K)/2	390,000
	Common Equity Capital (Avg will be same as o/s for the year)	M		100,000
	Credit Sales, 78% of total sales	N	A*78%	208,260
	Receivables - Closing balance	O		22,000
	Receivables - Opening balance	P		24,000
	Average Receivables	Q	(O+P)/2	23,000
1	Earnings per shares= Earnings/ No of shares		H/I	2.40
2	Gross Profit Margin= (Sales-COGS)/ Sales*100		A-B/A*100	40.07%
3	Operating Profit Margin= Op. Profit/ Sales*100		D/A*100	16.85%
4	Net Profit Margin= Net Profit/ Sales*100		H/A*100	8.99%
5	Total Asset Turnover= Sales/ Average Total Assets		A/L times	0.68
6	Returns on Assets= Net Income/Average Total Assets*100		H/A*100	6.15%
7	Return on Common Equity= Net Income/Avg Common Equity		H/M*100	24.00%
	Receivable Turnover (times) = Net Credit Sales / Average Accounts Receivable	R	N/Q	9.05
8	Receivable Turnover (in Days) = 365/ Receivable Turnover (times)		365/R	40.31
9	Interest Coverage(in times)= EBIT/Interest Expenses		D/E	4.09

Note: In question Return on comman stock is asked, hence consider average of comman stock, if asked for return on Equity in that case we have considered Comman stock+Equity share capital+retained Earnings