Question

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:

a quick ratio.

b total asset turnover.

c inventory turnover and days/ sales in inventory.

d net profit margin.

e dividend payout ratio.

f net working capital.

g equity multiplier (Total assets/Total equity)

h times interest earned.

i receivables turnover and day’s sales in receivables.

j return on assets.

k Use the DuPont equation to compute return on equity.

Answer 1

A	B	C	D	E	F	G	H
2		2)
3		In common size balance sheet, each line item is represented as % of total assets.
4		Balance Sheet for J & P Industries	2018	Common Size Balance Sheet
5		Current assets
6		Cash	215	2.91%	=D6/$D$12
7		Accounts receivable	310	4.20%	=D7/$D$12
8		Inventory	328	4.44%
9		Total current assets	853	11.56%
10		Fixed assets
11		Net plant and equipment	6,527	88.44%
12		Total assets	7,380	100.00%
13
14		Current liabilities
15		Accounts payable	298	4.04%	=D15/$D$12
16		Notes payable	1,427	19.34%	=D16/$D$12
17		Total currrent liabilities	1,725	23.37%
18		Long-term debt	2,308	31.27%
19		Owners' equity
20		Common stock and paid in surplus	1,000	13.55%
21		Retained earnings	2,347	31.80%
22		Total owners' equity	3,347	45.35%
23		Total liabilities and owners' equity	7,380	100.00%
24		3)
25		In common-size income statement, each line item is expressed as a % of sales.
26
27		Income Statement for J & P		Common Size Income Statement
28		Sales	4,053.00	100.00%	=D28/$D$28
29		Cost of goods sold	2,816.00	69.48%	=D29/$D$28
30		Depreciation	550	13.57%
31		EBIT	687	16.95%
32		Interest paid	502	12.39%
33		Taxable income	185	4.56%
34		Taxes (21%)	38.85	0.96%
35		Net income	146.15	3.61%
36
37		Dividends	47.15	1.16%
38		Addition to RE	99	2.44%
39