Walter is considering an investment in the Bikes Ahoy Company. He searched online and looked up their

Question:

Walter is considering an investment in the Bikes Ahoy Company. He searched online and looked up their 10K, 10G and annual report, where he found their last balance sheet and income statement.

BIKE’S AHOY BALANCE SHEET (numbers in the thousands)

ASSETS

Cash and marketable securities......................................$150

Accounts receivable..........................................................$250

Inventories.........................................................................$250

Net fixed assets.................................................................$900

Total Assets.....................................................................$1,550

LIABILITIES AND SHAREHOLDER’S EQUITY

Accounts payable.............................................................$200

Short-term debt...............................................................$100

Long-term debt................................................................$350

Shareholder’s equity.......................................................$900

Total liability/shareholder’s equity.............................$1,550

BIKE’S AHOY INCOME STATEMENT (numbers in the thousands)

Revenue.............................................$2,900

Cost of goods sold............................$1,500

Gross profit.......................................$1,400

Operation expenses............................$800

EBIT.......................................................$700

Interest paid.........................................$275

EBT........................................................$330

Taxes.....................................................$132

Earnings after taxes............................$198

a. What is the company’s current ratio?

b. If the average current ratio for the bike travel industry is 3.0, is Bikes Ahoy liquid?

c. What is the financial leverage for Bikes Ahoy?

d. What is Bikes Ahoy’s profitability ratio?

Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...