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The condensed financial statements of Marks Company for the years 2014-2015 are presented below: Marks Company...

The condensed financial statements of Marks Company for the years 2014-2015 are presented below:

Marks Company Comparative Balance Sheets As of December 31, 2014 and 2015

2015 2014

Cash $367,000 $134,000

Accounts receivable (net) 373,000 308,000

Inventories 379,000 342,000

Plant and equipment 1,850,000 1,116,000

Accumulated depreciation (263,000 ) (192,000 )

$2,706,000 $1,708,000

Accounts payable $342,000 $163,000

Dividends payable -0- 43,000

Bonds payable 400,000 -0-

Common stock ($10 par) 1,523,000 1,220,000

Retained earnings 441,000 282,000

$2,706,000 $1,708,000

Additional data:

Market value of stock at 12/31/15 is $80 per share.

Marks sold 35,000 shares of common stock at par on July 1, 2015.

Marks Company Condensed Income Statement For the Year Ended December 31, 2015

Sales revenue $2,428,000

Cost of goods sold 1,649,000

Gross profit 779,000

Administrative and selling expenses 500,000

Net income $279,000

Compute the following financial ratios by placing the proper amounts for numerators and denominators. (Round per unit answers to 2 decimal places, e.g. 52.75.)

(a) Current ratio at 12/31/15

(b) Acid test ratio at 12/31/15

(d) Inventory turnover in 2015

(e) Profit margin on sales in 2015

(f) Earnings per share in 2015

(g) Return on common stock equity in 2015

(h) Price earnings ratio at 12/31/15

(i) Debt to assets at 12/31/15

(j) Book value per share at 12/31/15

Solutions

Expert Solution

Calculations of ratios
Current Ratio = current assets/ currrent laibility
current assets = cash +accounts receviable+inventories
current assets = cash +accounts receviable+inventories
Current Assets = 367000+373000+379000=1119000
current lability / accounts payable = 342000
therefore current ratio = 1119000/342000= 3.27

b) Acid test ratio = current assets - inventories /current laibilities
acid test ratio = 1119000-379000= 740000
acid test ratio = 740000/342000 = 2.163

c) Account receviable turnover = sale / avereage accounts receviable
account receviable turnover = 2428000/527000 = 4.607
avereage accounts receviable= 373000+308000/2 =527000

D) inventory turnover= cost of goods sold/average inventory
average inventory = 379000+342000/2 = 550000
inventory turnover = 1649000/550000 = 2.998

e) profit margin = net income/sale *100
profir margin = 279000/2428000= 11%

F) Earning per share (EPS) = NET income/no of share outstanding
earning per share (EPS) = 279000/35000=7.97

g) return on common equity = net income /avg equity shareholder
avg common share = 1523000+1220000/2= 2133000
return on common equity = 279000/2133000 = 13%

h) Price earning ratio = Share price/ EPS
prie earning ratio= 80/7.97= 10.03

i) debt / equity = bonds payable/total assets
debt / equity = 400000/2706000= 0.147

j) Book value per share = common stock /no of stock outstanding
book value per share = 1523000/35000
book value per share= 43.51

ekkarill92 answered 6 months ago

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