Question

BALANCE SHEET ANALYSIS

Complete the balance sheet and sales information using the following financial data:

Total assets turnover: 1.3x
Days sales outstanding: 37.5 days^a
Inventory turnover ratio: 7x
Fixed assets turnover: 3.5x
Current ratio: 2.1x
Gross profit margin on sales: (Sales - Cost of goods sold)/Sales = 35%
^aCalculation is based on a 365-day year. Do not round intermediate calculations. Round your answer to the nearest cent.

Balance Sheet
Cash	$		Current liabilities	$
Accounts receivable			Long-term debt	52,500
Inventories			Common stock
Fixed assets			Retained earnings	105,000
Total assets	$350,000		Total liabilities and equity	$
Sales	$		Cost of goods sold	$

Answer 1

Solution:

Lets start computing one by one the missing data points.

a) Total liabilities and equity = Total assets = $350,000

b)Sales = Total Assets * Asset Turnover = $350,000 * 1.3 = $455,000

c) Cost of Goods Sold = Sales * (1-GP Margin) = $455,000 * (1-0.35) = $295,750

d) Fixed Assets = Sales / Fixed Asset Turnover = $455,000/3.5 = 130,000

e) Inventory = COGS / Inventory Turnover = $295,750/7 = 42,250

f) Account Receivable = Daily Sales outstanding * Sales/365 = 37.5 * $455,000/365 = 46,746.58

g) Cash is the balancing figure

Cash = Total Assets - Fixed Assets - Inventory - Accounts Receivable = 131,003.42

h) Current Liabilities = Current Assets/Current Ratio = (Cash + AR + Inventory)/2.1 = 104,761.90

i) Common Stock is a balancing figure

Common Stock = Total Equity and Liabilities - Current Liab - Long Term Debt - Retained Earnings = 87,738.1

The solutions looks like this.

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