Question

Use the​ common-size financial statements found​ here:

Common-Size Balance Sheet		2016
Cash and marketable securities	$	470	1.4	%
Accounts receivable		5,990	18.2
Inventory		9,450	28.7
Total current assets	$	15,910	48.4	%
Net property, plant, and equipment		16,990	51.6
Total assets	$	32,900	100.0	%
Accounts payable	$	7,150	21.7	%
Short-term notes		6,790	20.6
Total current liabilities	$	13,940	42.4	%
Long-term liabilities		7,040	21.4
Total liabilities	$	20,980	63.8	%
Total common shareholders’ equity		11,920	36.2
Total liabilities and shareholders’ equity	$	32,900	100.0	%

Common-Size Income Statement		2016
Revenues	$	29,990	100.0	%
Cost of goods sold		(20,040)	66.8
Gross profit	$	9,950	33.2	%
Operating expenses		(7,950)	26.5
Net operating income	$	2,000	6.7	%
Interest expense		(910)	3.0
Earnings before taxes	$	1,090	3.6	%
Income taxes		(396)	1.3
Net income	$	694	2.3	%

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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.

Answer 1

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