Question

1. Complete the balance sheet using the following information:

Quick Ratio:                            2.0                               ROE:                         16%

ACP:                                       40                                ROA:                         10%

GPM:                                      20%                             Inventory T/O:           10

Debt-to-Equity Ratio:             60%                             Total Asset T/O:        1.5625

Net Income:                            $80,000                       Average Daily Credit Sales:   $3,125

360 days per year

                                               

Balance Sheet

Cash                            __________    Current Liabilities       __________

Accts. Receivable                    L-T Liabilities             __________

Inventories                              __________    Total Liabilities            __________

T. Current Assets        __________    Stockholders’ Equity __________

Net Fixed Assets         500,000        Total Liabilities          

Total Assets                __________         & Equity    __________

Answer 1

Return on assets = Net income / Total assets
0.10 = $80,000 / Total assets
Total assets = $800,000

Return on equity = Net income / Stockholders’ equity
0.16 = $80,000 / Stockholders’ equity
Stockholders’ equity = $500,000

Debt-equity ratio = Total liabilities / Stockholders’ equity
0.60 = Total liabilities / $500,000
Total liabilities = $300,000

Total assets = Current assets + Net fixed assets
$800,000 = Current assets + $500,000
Current assets = $300,000

Average collection period = Accounts receivable / Average daily credit sales
40 = Accounts receivable / $3,125
Accounts receivable = $125,000

Total assets turnover = Sales / Total assets
1.5625 = Sales / $800,000
Sales = $125,000

Gross profit margin = (Sales - Cost of goods sold) / Sales
0.20 = ($125,000 - Cost of goods sold) / $125,000
Cost of goods sold = $100,000

Inventory turnover = Cost of goods sold / Inventories
10 = $100,000 / Inventories
Inventories = $10,000

Current assets = Cash + Accounts receivable + Inventories
$300,000 = Cash + $125,000 + $10,000
Cash = $165,000

Quick ratio = (Cash + Accounts receivable) / Current liabilities
2.0 = ($165,000 + $125,000) / Current liabilities
Current liabilities = $145,000

Total liabilities = Current liabilities + Long-term liabilities
$300,000 = $145,000 + Long-term liabilities
Long-term liabilities = $155,000

Total liabilities and equity = Total assets
Total liabilities and equity = $800,000