Question

Stealcase’s Balance Sheet, as of December 31(thousands of dollars)   

                                          2017      2018                                                                            2017      2018

Cash                                 30            25                  Account Payable                                  35          50

Accts Receivable          5              20                  Bank Loan                                            25           25

Inventory                        100         100                Accrued Taxes                                   15          25

Current Assets              135          245                Long Term, Dept current portion    12         12

                                                                                 Current Liabilities                                87         112

Net Plant & Equip           200          250                 Long-Term Dept                                100        95

                                                                                 Common Stock (10,000 shares)    100      100

                                                                                Additional paid-in capital                 38          38

                                                                                Retained Earnings                        10          150

Total Assets                   335        495                 Total Liabilities & Equity                          335        495

…………………………………………………………………………………..

Stealcase’s Income Statement (thousands of dollars)   

                                  2017          2018                                                                         2017          2018

Sales                        1200           2000                  Cost of Goods Sold                    750            1200

Gross Profit           450             800                  Operating Expenses                   350              500          

Interest Expense 50               90            

    

Profit (loss) Before

Taxes                       20               210                   Income Taxes                                  40                  70

Net Profit                 10              140

Statement of Retained Earnings 12/31/2018 (thousands of dollars)   

Retained Earnings, 12/31/17                        $       10

Net Income                                                               140

Dividends                                                                     0

                                                                            ________________

Retained Earnings, 12/31/18                               150

.....................................................................

1. What is the 2018 current ratio?

1. 2.28
2. .46
3. 2.19
4. .64
5. 4.42

2. On the Statement of Retained Earnings, by how much did Retained Earnings increase in 2018?

1. $10,000
2. 140,000
3. $10
4. $140
5. $150,000

3. What id the 2018 Dept to Equity ratio?

1. .72
2. .33
3. .56
4. .42
5. .39

4. What is the 2017 return on equity? (round to the nearest percentage point)

1. 3%
2. 25%
3. 28%
4. 49%
5. 7%

5. What is the 2018 quick ratio?

1. .07
2. 2.49
3. .46
4. 40
5. Some other amount

6. What is the 2017 Net Profit Margin? (round to the neatest percent)

1. 7%
2. 4%
3. 11%
4. 1%
5. 38%

7. What is the 2017 Average Collection Period/Days Sales Outstanding?

1. 1.52
2. 3.65
3. .04
4. .27
5. .66

8. What is the 2018 times interest earned ratio? (rounded to the nearest whole number)

1. 16
2. 3
3. 7
4. 6
5. 9

9. For the year just ended, 2018, do you think the company is performing well?

1. There is no way to judge if this company is doing well.
2. Yes. Inventory turnover is increasing and ROA is increasing.
3. No. Retained earnings is increasing and total asset turnover is decreasing.
4. Yes. ROE is increasing and Gross Margin is increasing.
5. No. Liabilities are increasing and taxes are increasing.

10. As a creditor what concerns might you have about this company?

1. Debt to equity ratio too low
2. Quick ratio low
3. Return on Equity too low
4. Times interest earned too high
5. Total debt ratio too low

Answer 1

c. 2.19

Current ratio = Current assets/Current liabilities = 245/112 = 2.19

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b. 140,000

On the statement of retained it can be seen that retained earnings increased by $140 (in thousands)

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a. 0.72

Debt to equity ratio = Total debt/Total equity = Tota liabilities/Total equity = 207/288 = 0.72

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e.7%

Return on equity = Net income/Total equity = 10/148 = 7%

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e. Some other amount

Quick ratio = (Current assets - Inventory)/Current liabilities = 45/112 = 0.4

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d. 1%

Net profit margin = Net profit/Sales = 10/1200 = 1%

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a. 1.52

Average collection period = 365*accounts receivables/Sales = 365*5/1200 = 1.52

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e. 9

Timer interest earned = Earnings before interest and taxes/Interest expense = 800/90 = 9

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