Question

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

1.Sales

Sales = Total assets * turnover ratio = 400,000*1.5 = 600,000

2.Gross profit margin

Gross profit margin = 25%*sales = 25%*600,000 = 150,000

So COGS = 600,000-150,000 = 450,000

3.Current liabilities

Total liabilities = 40%*total assets = 40%*400,000 = 160,000

So current liabilities = 160,000-long term debt = 160,000-50,000 = 110,000

4.Accounts receivable

Accounts receivable = 36.5/365*sales = 36.5/365*600,000 = 60,000

5.Current assets

Inventory = COGS/turnover ratio = 450,000/3.75 = 120,000

Let cash be X. Then quick ratio = (cash+accounts receivable)/current liabilities = (X+60,000)/110,000 = 0.8, i.e X = 28,000. So cash is 28,000

Current assets = cash+accounts receivable+inventory = 28000+60000+120000 = 208,000

6.Fixed asset

Fixed asset = total asset - current asset = 400,000-208,000 = 192,000

7.

Common stock = (total liabilties and equity) - retained earnings - total liabilities = 400,000-100,000-160,000 = 140,000

Sales: 600,000
Cost of Goods Sold: 450,000
Cash: 28,000			Accounts payable: 110,000
Accounts receivable: 60,000			Long term debt: 50,000
Inventory: 120,000			Common stock: 140,000
Fixed assets: 192,000			Retained earnings: 100,000
Total assets: 400,000			Total liabilities and equity: 400,000