BUSI 320 Comprehensive Problem 1Version FALL

Use the following information to answer the questions below:

note:all sales are credit sales

Income Stmt info:

2017

2018

Sales

$900,000

$990,000

less Cost of Goods Sold:

325,000

346,125

Gross Profit

575,000

643,875

Operating Expenses

450,000

477,000

Earnings before Interest& Taxes

125,000

166,875

Interest exp

25,000

31,000

earnings before Taxes

100,000

135,875

Taxes

40,000

54,350

Net Income

$60,000

$81,525

Balance Sheet info:

12/31/2017

12/31/2018

Cash

60,000

$63,600

Accounts Receivable

80,000

$89,600

Inventory

110,000

$118,800

Total Current Assets

$250,000

$272,000

Fixed Assets (Net)

$300,000

$330,000

Total Assets

$550,000

$602,000

Current Liabilities

$130,000

$156,000

Long Term Liabilities

$150,000

$170,000

Total Liabilities

$280,000

$326,000

Stockholder's Equity

$270,000

$276,000

Total Liab & Equity:

$550,000

$602,000

Compute each of the following ratios for 2017 and 2018 and

indicate whether each ratio wasgetting "better" or "worse" from 2017 to 2018

and whether the 2018 ratio was "good" or "bad" compared to the Industry Avg

(round all numbers to 2 digits past the decimal place)

2017

2018

Getting Better or Getting Worse?

2018 Industry Avg

"Good" or "Bad" compared to Industry Avg

Profit Margin

0.09

Current Ratio

1.80

Quick Ratio

1.12

Return on Assets

0.18

Debt to Assets

0.60

Receivables turnover

12.00

Avg. collection period*

22.10

Inventory Turnover**

8.25

Return on Equity

0.16

Times Interest Earned

8.15

*Assume a 360 day year

**Inventory Turnover can be computed 2 different ways.Use the formula listed in the text

(the one the text indicates many credit reporting agencies generally use)