The comparative statements of Andy?s Art Company are presented below.

Additional information:

1. All sales were on account. 2. Weighted-average common shares for both years was 57,000.

Instructions

Calculate the following ratios for 2021 and 2020. Indicate whether each ratio has improved or deteriorated.

a. Gross profit margin h. Return on common shareholders? equity

b. Profit margin

c. Earnings per share

d. Receivables turnover

e. Collection period

f. Inventory turnover

g. Days sales in inventory

i. Return on assets

j. Current ratio

k. Acid-test ratio

l. Asset turnover

m. Debt to total assets

Taking It Further

Calculate the operating cycle for Andy?s Arts and compare it with that of its nearest competitor, which has an operating cycle of 60 days. Does Andy?s Arts have a liquidity problem?

Transcribed Image Text:

ANDY'S ART COMPANY Income Statement For the Year Ended December 31 2021 2020 Net sales $2,153,650 $1,828,500 Cost of goods sold 1,119,900 1,010,500 Gross profit Selling and administrative expense 1,033,750 818,000 750,000 516,000 Income from operations Interest expense 283,750 302,000 20,000 18,000 Profit before income tax 263,750 284,000 Income tax expense 60,665 85,000 Profit $ 203,085 $ 199,000 ANDY'S ART COMPANY Balance Sheet December 31 Assets 2021 2020 2019 Current assets Cash $ 123,050 $129,100 $114,200 Accounts receivable (net) 142,600 122,800 102,800 Inventory 170,000 113,000 115,500 Total current assets 435,650 364,900 332,500 Property, plant, and equipment (net) 605,300 605,300 520,300 Total assets $1,040,950 $970,200 $852,800 Liabilities and Shareholders' Equity Current liabilities Accounts payable Income taxes payable $ 165,000 $160,000 $145,400 46,250 43,500 42,000 Total current liabilities 211,250 203,500 187,400 Bonds payable 220,000 210,000 200,000 Total liabilities 431,250 413,500 387,400 Shareholders' equity Common shares 280,000 280,000 300,000 Retained earnings 329,700 276,700 165,400 Total shareholders' equity 609,700 $1,040,950 556,700 $970,200 465,400 Total liabilities and shareholders' equity $852,800