Question

​(Analyzing common-size financial​ statements) Use the​ common-size financial statements found​ here: LOADING... to respond to your​ boss' request that you write up your assessment of the​ firm's financial condition.​ Specifically, write up a brief narrative that responds to the following​ questions: a. How much cash does Patterson have on hand relative to its total​ assets? b. What proportion of​ Patterson's assets has the firm financed using​ short-term debt?​ Long-term debt? c. What percent of​ Patterson's revenues does the firm have left over after paying all of its expenses​ (including taxes)? d. Describe the relative importance of​ Patterson's major expense​ categories, including cost of goods​ sold, operating​ expenses, and interest expenses. a. How much cash does Patterson have on hand relative to its total​ assets? The cash Patterson has on hand relative to its total assets is nothing​%. ​(Round to one decimal​ place.)

Common-Size Balance Sheet 2016:

Cash and marketable securities $ 540 1.6 %

Accounts receivable 6,020 18.2

Inventory 9,510 28.7

Total current assets $ 16,070 48.5 %

Net property, plant, and equipment 17,040 51.5

Total assets $ 33,110 100.0 %

Accounts payable $ 7,210 21.8 %

Short-term notes 6,840 20.7

Total current liabilities $ 14,050 42.4 %

Long-term liabilities 7,000 21.1

Total liabilities $ 21,050 63.6 %

Total common shareholders’ equity 12,060 36.4

Total liabilities and shareholders’ equity $ 33,110 100.0 %

Common-Size Income Statement 2016:

Revenues $ 30,030 100.0 %

Cost of goods sold (19,960) 66.5

Gross profit $ 10,070 33.5 %

Operating expenses (7,980) 26.6

Net operating income $ 2,090 7.0 %

Interest expense (860) 2.9

Earnings before taxes $ 1,230 4.1 %

Income taxes (447) 1.5

Net income $ 783 2.6 %

Answer 1

Solution :-

( a ) The cash Patterson have on its hands relative to its total asset is :- 1.6% according to the common size statement given .

( b) The proportion of Patterson asset that has been financed by short term debt is :- 42.4%

The proportion of Patterson asset that has been financed by long term debt is :- 21.1%

( c) The revenue left over after paying all tge expenses ( including taxes ) are Net income .

So, the percentage of Net income to revenue is 2.6%

( d ) Relative importance of Patterson major expenses :-

Cost of goods sold represent 66.5 % of Patterson sales

Operating expenses represents 26.6 % of sales .

Interest expense represent 2.9 % of sales .