Question

SHOW/ EXPLAIN THE WORK PLEASE

Complete problem: Balance Sheet Analysis

o Complete the balance sheet and sales information in the table that follows for XYZ, Inc., using the following financial data:

o Show your work.

Total assets turnover: 1.5 Gross profit margin on sales: (Sales – Cost of goods sold)/Sales = 25% Total liabilities-to-assets ratio: 40% Quick ratio: 0.80 Days sales outstanding (based on 365-day year): 36.5 days Inventory turnover ratio: 3.75 Partial Income Statement Information _______________________________________________________________________________________

Sales ____________

Cost of goods sold ____________

Balance Sheet Information

______________________________________________________________________________________

Cash ___________ Accounts payable ___________ Accounts receivable ___________ Long-term debt 50,000 Inventories ___________ Common stock ___________ Fixed assets ___________ Retained earnings 100,000 Total assets $400,000___ Total liabilities and equity __________

Answer 1

We get sales figure from Total asset turnover ratio which is 1.5 the formula is Sales/Total Assets

We have total assets and ratio we can substitute them in the formula

So we get

Total asset turnover ratio = Sales/Total Assets

1.5 = sales/400000

So sales = 400000*1.5 = 600000

Gross profit margin = (Sales – Cost of goods sold )/Sales

25% = (600000 - Cost of goods sold) / 600000

150000 = 600000 - Cost of goods sold

Cost of goods sold = 600000-150000

Cost of goods sold = 450000

Total Liabilities to Assets = 40%

40% = Total Liabilities / Total Assets

0.4 = TL/ 400000

0.4 * 400000 = TL

Total Liabilities = 160000

By subtracting Long term debt from total liabilities we get Accounts Payable which is 110000

We have total liabilities and we get total equity by subtracting Total liabilities from total liabilities and equity which is 240000. We get common stocks by subtracting Retained earnings from total equity which is 140000

Days sales outstanding = (Account receivable / sales)*365

36.5 = (AR/600000)*365

AR = (36.5*600000)/365

AR = 60000

Quick ratio = (cash and cash equivalents + accounts receivable) / current liabilities.

0.8 = (C+60000)/110000

C = (110000*0.8)-60000

Cash and cash equivalent = 28000

Inventory turnover ratio =(Inventory /Cost of goods sold)*365

3.75 = (Inv/450000)*365

Inv =(3.75*450000)/365

Inventory = 4623.28

Fixed assets = total assets – cash – accounts receivable – inventory

Excel for working