Question

Using the formulas provided for the exam, and the balance sheet and income statement shown below, calculate the ratios (1 point each):

CORRIGAN CORPORATION: BALANCE SHEET AS OF DECEMBER 31:

Cash                                                         72,000

Accounts Receivable                              439,000

Inventory                                                 894,000

            Total Current Assets               1,405,000

Land and Building                                  238,000

Machinery                                               132,000

Other Fixed Assets                                    61,000

Total Assets                                         1,836,000

                                                          ==========

Accounts Payable                                     80,000

Accrued Liabilities                                    45,010

Notes Payable                                         476,990

            Total Current Liabilities            602,000

Long-term Debt                                       404,290

             Total Liabilities                       1,006,290

Common Stock                                        575,000

Retained Earnings                                   254,710

Total Liabilities and Equity                 1,836,000

                                                              =========

CORRIGAN CORPORATION: INCOME STATEMENT FOR YEAR ENDED DECEMBER 31:

Net Sales                                                4,240,000

Cost of Goods Sold                             3,680,000

            Gross Operating Profit                 560,000

General, Admin. and Selling Exp.      303,320

Depreciation                                         159,000

            Earnings Before Int. & Taxes    97,680

Interest                                                     67,000

            Earnings Before Income Taxes      30,680

Taxes (40%)                                                  12,272

Net Income                                           18,408

                                                              ========

____________    Current Ratio                                ____________ Operating Profit Margin

____________    Quick Ratio                                  ____________ Total Debt to Equity

____________    Inventory Turnover                      ____________    Return on Assets

____________    Average Collection Period           ____________    Return on Equity

____________    Total Assets Turnover                 _____________ Interest Coverage (TIE)

Answer 1

Current Ratio = Current Assets / Current Liabilities = 1405000 / 602000 =   2.33

Quick Ratio = Quick Assets / Current Liabilities = ( 72000 + 439000 ) / 602000 = 0.8488

Inventory Turnover = Cost of Goods Sold / Inventory = 3680000 / 894000 = 4.12

Average Collection Period = 365 / (sales / Accounts Receivable) = 365 / (4240000 / 439000) = 37.79 Days

Total Assets Turnover = Sales / Total Assets = 4240000 / 1836000 = 2.31

Operating Profit Margin = EBIT / sales = 97680 / 4240000 = 2.30%

Total Debt to Equity = Total Liabilities / Total Equity = 1006290 / ( 575000 + 254710) = 1.21

Return on Assets = Net income / Total Assets = 18408 / 1836000 = 1%

Return on Equity = Net income / Total Equity =18408 / ( 575000 + 254710) = 2.22%

Times Interest Earned = EBIT / Interest Expense = 97680 / 67000 = 1.46