Question

Below are the financial statements for J & P Industries

Balance Sheet for J & P Industries
	2018
Current assets
Cash	215
Accounts receivable	310
Inventory	328
Total current assets	853
Fixed assets
Net plant and equipment	6,527
Total assets	7,380
Current liabilities
Accounts payable	298
Notes payable	1,427
Total currrent liabilities	1,725
Long-term debt	2,308
Owners' equity
Common stock and paid in surplus	1,000
Retained earnings	2,347
Total owners' equity	3,347
Total liabilities and owners' equity	7,380

Income Statement for J & P
Sales	4,053.00
Cost of goods sold	2,816.00
Depreciation	550.00
EBIT	687.00
Interest paid	502.00
Taxable income	185.00
Taxes (21%)	38.85
Net income	146.15
Dividends	47.15
Addition to RE	99.00

2. Construct a common size balance sheet in Excel for 2018 and submit the spreadsheet.
3. Construct a common size income statement in Excel for 2018 and submit the spreadsheet. (Click for video on how to construct common size financial statements)
4. Compute the following:

1. quick ratio.
2. total asset turnover.
3. inventory turnover and days/ sales in inventory.
4. net profit margin.
5. dividend payout ratio.
6. net working capital.
7. equity multiplier (Total assets/Total equity)
8. times interest earned.
9. receivables turnover and day’s sales in receivables.
10. return on assets.
11. Use the DuPont equation to compute return on equity.

Answer 1

A	B	C	D	E	F	G	H
2
3		In common size balance sheet, each line item is represented as % of total assets.
4			2018	Common Size Balance Sheet
5		Current assets
6		Cash	$215.00	2.91%	=D6/$D$12
7		Accounts receivable	$310.00	4.20%	=D7/$D$12
8		Inventory	$328.00	4.44%
9		Total current assets	$853.00	11.56%
10		Fixed assets		0.00%
11		Net plant and equipment	$6,527.00	88.44%
12		Total assets	$7,380.00	100.00%
13
14		Current liabilities
15		Accounts payable	$298.00	4.04%
16		Notes payable	$1,427.00	19.34%
17		Total currrent liabilities	$1,725.00	23.37%
18		Long-term debt	$2,308.00	31.27%
19		Owners' equity		0.00%
20		Common stock and paid in surplus	$1,000.00	13.55%
21		Retained earnings	$2,347.00	31.80%
22		Total owners' equity	$3,347.00	45.35%
23		Total liabilities and owners' equity	$7,380.00	100.00%
24
25
26		In a common-size income statement, each line item is expressed as a % of sales.
27		Income Statement for J & P
28			2018	Common Size Balance Sheet
29		Sales	$4,053.00	100.00%	=D29/$D$29
30		Cost of goods sold	$2,816.00	69.48%	=D30/$D$29
31		Depreciation	$550.00	13.57%
32		EBIT	$687.00	16.95%
33		Interest paid	$502.00	12.39%
34		Taxable income	$185.00	4.56%
35		Taxes (21%)	$38.85	0.96%
36		Net income	$146.15	3.61%
37
38		Dividends	$47.15	1.16%
39		Addition to RE	$99.00	2.44%
40
41		Quick ratio	=(Cash+Accounts Receivables)/Current Liabilities
42			=($215+$310)/$1175
43			0.30	=(D6+D7)/D17
44
45		Total Assets Turnover	=Sales / Total Assets
46			=$4053 / 7380
47			0.55	=D29/D12
48
49		Inventory turnover	=Cost of goods sold / Average Inventory
50			=$2,816/$328
51			8.59	=D30/D8
52
53		Days Sales in inventory	=365/Inventory turnover
54			=365/8.59
55			42.51	=365/D51
56
57		Net Profit Margin	=Net Profit / Sales
58			=146.15/4053
59			3.61%	=D36/D29
60
61		Dividend Payout Ratio	=Dividends / Net Income
62			=47.15/146.15
63			32.26%	=D38/D36
64