Question

Table 1

                               Income Statement                                                            Balance Sheet

Sales                                   20,000,000                        Assets:

Cost of Goods Sold               8,000,000                         Cash $ 5,000,000

                                             12,000,000                        Marketable Securities 12,500,000

Selling and Administrative 1,600,000                         Accounts Receivable, net 2,500,000

Depreciation                          3,000,000                          Inventory                              30,000,000

                                              7,400,000                          Prepaid Expenses 5,000,000

Interest                                  2.000,000                          Plant& Equipment 30,000,000

                                              5,400,000                          Total Assets                         85,000,000

Taxes (40%)                          2,160,000                          

                                              3,240,000                          

Common Stock Div. 600,000                          Liabilities and Equity:

                                              $2,640,000                          Accounts Payable               $20,000,000

                                                                                               Notes Payable                    5,000,000

                                                                                               Accrued Expenses              5,000,000

                                                                                               Bonds                               25,000,000

                                                                                               Common Stock                    5,000,000

                                                                                               Capital in Excess of Par    10,000,000

                                                                                               Retained Earnings              15,000,000

Total Liabilities and

                                                                                               Equity                                   $85,000,000

Shares outstanding of common stock = 1,000,000

Market price of common stock = $18.

Use Table 1 for the following unanswered questions (1.6-1.10).

1-1.    The Current Ratio is: 1.83: 1

1-2.     The Net Profit margin is:16.20%

1-3.     The Quick Ratio is:0.67: 1

1-4    The Times Interest Earned ratio is:3.7 times

1-5.     The Earnings Per Share is:$3.24

1-6.     The Gross Profit Margin is:

1-7.     The Total Debt to Total Asset ratio is:

1-8.     Return on Assets ratio is:

1-9.     The Total Asset Turnover ratio is:

1-10.   The Operating Profit Margin is:

1-11.   The Average Collection Period (365 day year) is:

1-12.   The Market to Book ratio is:

1-13.   The Debt to Equity ratio is:

1-14.   The Inventory Turnover ratio is:

1-15.   The Return on Equity is:

Answer 1

Answer to Part 1-6.

Gross Profit Margin = Gross Profit / Net Sales * 100
Gross Profit = Sales – Cost of Goods sold
Gross Profit = $20,000,000 - $8,000,000
Gross Profit = $12,000,000

Gross Profit Margin = 12,000,000 / 20,000,000 * 100
Gross Profit Margin = 60.00%

Answer to Part 1-7.

Total Debt to Total Asset Ratio = Total Debt / Total Assets
Total Debt = Accounts Payable + Notes Payable + Accrued Expenses + Bonds
Total Debt = $20,000,000 + $5,000,000 + $5,000,000 + $25,000,000
Total Debt = $55,000,000

Total Debt to Total Asset Ratio = 55,000,000 / 85,000,000
Total Debt to Total Asset Ratio = 0.65 times

Answer to Part 1-8.

Return on Assets Ratio = Net Operating Income / Total Assets * 100
Return on Assets Ratio = 7,400,000 / 85,000,000 * 100
Return on Assets Ratio = 8.71%

Answer to Part 1-9.

Total Assets Turnover Ratio = Net Sales / Total Assets
Total Assets Turnover Ratio = 20,000,000 / 85,000,000
Total Assets Turnover Ratio = 0.24 times