BUSI 320 Comprehensive Problem 1 solutions complete answers
Use the following information to answer the questions on page 2 below:
Note: all sales are credit sales.
Income Stmt info:
2018
2019
Sales
$ 1,000,000
$ 1,050,000
less Cost of Goods Sold:
400,000
432,000
Gross Profit
600,000
618,000
Operating Expenses
350,000
365,750
Earnings before Interest & Taxes
250,000
252,250
Interest exp
20,000
20,400
earnings before Taxes
230,000
231,850
Taxes
69,000
69,555
Net Income
$ 161,000
$ 162,295
Balance Sheet info:
12/31/2018
12/31/2019
Cash
25,000
$ 30,000
Accounts Receivable
50,000
$ 54,000
Inventory
125,000
$ 130,000
Total Current Assets
$ 200,000
$ 214,000
Fixed Assets (Net)
$ 300,000
$ 318,000
Total Assets
$ 500,000
$ 532,000
Current Liabilities
$ 110,000
$ 119,900
Long Term Liabilities
$ 180,000
$ 175,000
Total Liabilities
$ 290,000
$ 294,900
Stockholder's Equity
$ 210,000
$ 237,100
Total Liab & Equity:
$ 500,000
$ 532,000
Compute each of the following ratios for 2018 and 2019 and
indicate whether each ratio was getting "better" or "worse" from 2018 to 2019
and was "good" or "bad" compared to the Industry Avg in 2019
(round all numbers to 2 digits past the decimal place)
2018
2019
Getting Better or Getting Worse?
2019 Industry Avg
"Good" or "Bad" compared to Industry Avg
Profit Margin
0.11
Current Ratio
1.90
9uick Ratio
0.66
Return on Assets
.28
Debt to Assets
.50
Receivables turnover
18.00
Avg. collection period*
15.50
Inventory Turnover**
9.25
Return on Equity
0.55
Times Interest Earned
13.20
*Assume a 360 day year
**Inventory Turnover can be computed 2 different ways. Use the formula listed in the text
