The T & P Manufacturing Company was very satisfied with their xxx1 performance. The company had only
Question:
The T & P Manufacturing Company was very satisfied with their xxx1 performance. The company had only begun operations the prior year, and as a result, sales had been slow. However, things had picked up considerably in xxx1 with sales more than doubling in volume. T & P had changed none of its business practices during the year and had managed to hold its cost of goods sold to 78% of sales. All sales were made on credit, and payment was required within 30 days of the sale. The company paid for its purchases in 30 days and maintained a cash balance of 20% in sales. The only thing that had changed during the year was the company?s inventory turnover, which had jumped from 3 to 6. While T & P?s management was enthusiastic about the company?s increased level of sales, it was concerned about the possible necessity of increasing its short-term debt. In order to assess the situation, the company was in the process of completing the financial statements shown below. (Inv. Turn = C.O.G.S/Inv.). Also, use 360-day/year for ratios computation.
Complete the forms given. For xxx1, use short-term Notes Payable as the balancing account (a ?plug?).
1. Compare ROE, ROA, EM, PM, A/R turnover, inventory turnover, fixed asset turnover for the years xxxo and xxx1.
2. What is your assessment of T & P Manufacturing Company based on the figures obtained in questions 1 and 2? Will the company need to raise external funds (EFN or AFN ) in xxx1, and how much?
3. Complete the statements for xxx1 assuming that cost of goods sold is 83%, that the company maintains cash balance of 15% of sales, everything else remains as stated in the problem. And redo questions 1, 2 and 3.
Cornerstones of Financial and Managerial Accounting
ISBN: 978-1111879044
2nd edition
Authors: Rich, Jeff Jones, Dan Heitger, Maryanne Mowen, Don Hansen