Question: Ian Manufacturing Company was organized five years ago and manufactures

Ian Manufacturing Company was organized five years ago and manufactures toys. Its most recent three years’ balance sheets and income statements are reproduced below:


A reconciliation of retained earnings for years ended June 30, Year 4, and Year 5, follows:


Additional Information:
1. All sales are on account.
2. Long-term liabilities are owed to the company’s bank.
3. Terms of sale are net 30 days.

Required:
a. Compute the following measures for both Years 4 and 5:
(1) Working capital.
(2) Current ratio.
(3) Acid-test ratio.
(4) Accounts receivable turnover.
(5) Collection period of receivables.
(6) Inventory turnover.
(7) Days to sell inventory.
(8) Debt-to-equity ratio.
(9) Times interest earned.
b. Using Year 3 as the base year, compute an index-number trend series for:
(1) Sales.
(2) Cost of goods sold.
(3) Gross profit.
(4) Marketing and administrative costs.
(5) Net income.
c. Based on your analysis in (a) and (b), prepare a one-page report yielding a recommendation on whether to grant a loan to Ian Manufacturing. Support your recommendation with relevantanalysis.
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  • CreatedJanuary 22, 2015
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