Question

2. Balance Sheet Analysis

Consider the following financial data for J. White Industries:

Total assets turnover: 1.2

Gross profit margin on sales: (Sales - Cost of goods sold)/Sales = 26%

Total liabilities-to-assets ratio: 55%

Quick ratio: 0.85

Days sales outstanding (based on 365-day year): 38 days Inventory turnover ratio: 5.0

Open Excel spreadsheet and perform the required analysis to answer the questions below.

Complete the balance sheet and sales information in the table that follows for J. White Industries. Do not round intermediate calculations. Round your answers to the nearest whole dollar.

Partial Income

Statement Information

Sales                            $

Cost of goods sold        $

Balance Sheet

Cash                                $                             Accounts payable                           $

Accounts receivable         $                             Long-term debt                     $ 50,000

Inventories                   $                              Common stock                            $

Fixed assets                 $                               retained earnings                       $

Total assets                  $400000                  total liabilities equity                   $

Answer 1

Total Assets Turnover = Sales / Total Assets
1.20 = Sales / $400,000
Sales = $480,000

Gross Profit Margin = (Sales - Cost of Goods Sold) / Sales
0.26 = ($480,000 - Cost of Goods Sold) / $480,000
Cost of Goods Sold = $355,200

Total Liabilities-to-Assets Ratio = Total Liabilities / Total Assets
0.55 = Total Liabilities / $400,000
Total Liabilities = $220,000

Days Sales Outstanding = 365 * Accounts Receivable / Sales
38 = 365 * Accounts Receivable / $480,000
Accounts Receivable = $49,973

Inventory Turnover Ratio = Cost of Goods Sold / Inventories
5.00 = $355,200 / Inventories
Inventories = $71,040

Total Liabilities = Accounts Payable + Long-term Debt
$220,000 = Accounts Payable + $50,000
Accounts Payable = $170,000

Quick Ratio = (Cash + Accounts Receivable) / Accounts Payable
0.85 = (Cash + $49,973) / $170,000
Cash = $94,527

Total Assets = Cash + Accounts Receivable + Inventories + Fixed Assets
$400,000 = $94,527 + $49,973 + $71,040 + Fixed Assets
Fixed Assets = $184,460

Total Liabilities and Equity = Total Assets
Total Liabilities and Equity = $400,000

Total Liabilities and Equity = Accounts Payable + Long-term Debt + Common Stock + Retained Earnings
$400,000 = $170,000 + $50,000 + Common Stock + Retained Earnings
Common Stock + Retained Earnings = $180,000