Question

4)

Common-Size Balance Sheet		2016
Cash and marketable securities	$	550	1.7	%
Accounts receivable		5,990	18.1
Inventory		9,530	28.8
Total current assets	$	16,070	48.6	%
Net property, plant, and equipment		16,980	51.4
Total assets	$	33,050	100.0	%
Accounts payable	$	7,210	21.8	%
Short-term notes		6,790	20.5
Total current liabilities	$	14,000	42.4	%
Long-term liabilities		6,950	21.0
Total liabilities	$	20,950	63.4	%
Total common shareholders’ equity		12,100	36.6
Total liabilities and shareholders’ equity	$	33,050	100.0	%

Common-Size Income Statement		2016
Revenues	$	29,970	100.0	%
Cost of goods sold		(19,960)	66.6
Gross profit	$	10,010	33.4	%
Operating expenses		(8,040)	26.8
Net operating income	$	1,970	6.6	%
Interest expense		(850)	2.8
Earnings before taxes	$	1,120	3.7	%
Income taxes		(407)	1.4
Net income	$	713	2.4	%

?(Analyzing common-size financial? statements) Use the? common-size financial statements to respond to your? boss' request that you write up your assessment of the? firm's financial condition.? Specifically, write up a brief narrative that responds to the following? questions:

a. How much cash does Patterson have on hand relative to its total? assets? ?(Round to one decimal? place.)

b. What proportion of? Patterson's assets has the firm financed using? short-term debt?? Long-term debt?

c. What percent of? Patterson's revenues does the firm have left over after paying all of its expenses? (including taxes)?

d. Describe the relative importance of? Patterson's major expense? categories, including cost of goods? sold, operating?expenses, and interest expenses.

Answer 1

a) % of cash to total asset = 550/33050

                               = .017% or 1.7%

b)% of asset to finance short term debt= current liabilities /total asset

                       = 14000/33050

                             = .4236 or 42.36%

c)Revenue left after paying all expenses : 2.4%

d)cost of goods sold is a unit cost of product sold (directly proportion to sales ) .so It is a major portion cost incurred to make sales revenue .

operating expense is a cost incurred for day to day operations of the company.which means around 26.8% of revenue is incurred on operations

Interest expense constitute 2.8% of revenue ( interest paid on debt)