Financial Ratios. Calculate the following financial ratios to reveal any problem areas and be in a...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Financial Ratios. Calculate the following financial ratios to reveal any problem areas and be in a position to assess the financial condition of the company.2 (Note that net credit sales net sales.): Ratio Formula Liquidity Ratios (1) Current ratio current assets current liabilities (2) Quick ratio cashnet trade accounts receivable + marketable securities current liabilities Activity Ratios (3) Accounts receivable turnover (4) Days' receivables net credit sales net trade accounts receivable 365 accounts receivable turnover (5) Inventory turnover cost of goods sold inventory The formulas used in these ratios comply with those found in the major financial services that report industry statistics. (6) Days' inventory (7) Asset turnover Profitability Ratios (8) Income to net worth 365 inventory turnover net credit sales total assets net income (after taxes) assets - liabilities net income (after taxes) total assets (9) Income to total assets Leverage Ratios (10) Liabilities to net worth (11) Liabilities to total assets (12) Times interest earned total liabilities assets - liabilities total liabilities total assets net after tax income + interest expense + income taxes interest expense You have obtained the following median industry ratios for analyzing the results: Ratio Median Industry Ratio Current... Quick Accounts receivable turnover. Days' receivables.. Inventory turnover Days' inventory, Asset turnover...... Income to net worth......... Income to total assets. Liabilities to net worth.. Liabilities to total assets.. 1.90 .90 10.43 35.00 5.85 62.39 2.83 .12 .05 1.11 .53 3.00 Times interest earned....... Calculate the ratios on a separate part of the worksheet. Set up the formulas, entering the correct spreadsheet cells. Use the following headings: Median Ratio 2008 2009 Industry Peach Blossom Cologne Company Working Trial Balance-Balance Sheet 12-31-09 Per Working Per Paper Audit Books Reference 12-31-08 12-31-09 Assets: 101 Cash-Big City National Bank 105 Accounts receivable 106 Allowance for bad debts 109 Inventory 210 Land 220 Buildings 221 Accum. depn.- buildings 230 Machinery and equipment 231 Accum. depn.- mach.& equip. 240 Automotive equipment 339415 420678 124021 235380 (10485) (4800) 777152 600580 82250 82250 276263 276263 (65416) (74625) 540845 737045 (160866) (185939) 99425 118925 241 Accum. depn.- auto. equip. (52798) (81892) 250 Office furniture & fixtures 106433 113233 251 Accum. depn.- off. fum.& fix. (37581) (43073) Total assets 2018658 2194025 Liabilities: 301 Accounts payable 223161 176790 305 Accrued interest 10625 8750 306 Dividends payable 15725 15725 307 Federal income tax payable 23023 25000 308 Notes payable-short term 125000 401 Notes payable-long term 150000 Total liabilities 397534 376265 Owners' Equity: 501 Common stock 925000 925000 505 Other contributed capital 95979 95979 601 Retained earnings 429855 600145 605 Dividends (15725) (15725) 610 Current net income 186015 212361 Total owners' equity 1621124 1817760 Total liabilities & owners' equity 2018658 2194025 TB-BS Per Reclassification Adjustments Audit Items Financial Statements Debit Credit 12-31-09 Debit Credit 12-31-09 Working Per Per Paper Audit Books Reference 12-31-08 12-31-09 REVENUE: 701 Sales 3447472 3857549 703 Sales Returns & Allowances (26530) (28318) 3420942 3829231 EXPENSES: 1420933 1651366 Net Sales 801 Cost of Goods Sold Gross Margin OPERATING EXPENSES: 820 Wage and Salary Expense 2000009 2177865 1418720 1487700 821 Payroll Tax Expense 99310 105924 822 Depreciation Expense 64422 76368 823 Rent Expense 3750 3750 824 Office Supplies Expense 8615 10825 825 Small Tools Expense 2988 5650 826 Advertising Expense 6313 7980 827 Insurance 15737 22415 828 Repairs and Maintenance 17869 16222 829 Property Tax 13463 17100 830 Utilities 10670 14325 831 Professional Fees 26875 35875 832 Miscellaneous Expense 302 1771 834 Freight Expense 833 Provision for Bad Debts Total Operating Expenses 9925 8650 28150 32386 1727109 1846941 Net Income From Operations 272900 330924 OTHER INCOME (EXPENSE): 901 Interest Expense (27500) (14063) 930 Gain(Loss) Sale of Fixed Assets 18638 (4500) 950 Miscellaneous Income 0 0 Net Other Income (8862) [18563) Net Income Before Taxes 264038 312361 940 Federal Income Tax 78023 100000 Net Income 186015 212361 Financial Ratios. Calculate the following financial ratios to reveal any problem areas and be in a position to assess the financial condition of the company.2 (Note that net credit sales net sales.): Ratio Formula Liquidity Ratios (1) Current ratio current assets current liabilities (2) Quick ratio cashnet trade accounts receivable + marketable securities current liabilities Activity Ratios (3) Accounts receivable turnover (4) Days' receivables net credit sales net trade accounts receivable 365 accounts receivable turnover (5) Inventory turnover cost of goods sold inventory The formulas used in these ratios comply with those found in the major financial services that report industry statistics. (6) Days' inventory (7) Asset turnover Profitability Ratios (8) Income to net worth 365 inventory turnover net credit sales total assets net income (after taxes) assets - liabilities net income (after taxes) total assets (9) Income to total assets Leverage Ratios (10) Liabilities to net worth (11) Liabilities to total assets (12) Times interest earned total liabilities assets - liabilities total liabilities total assets net after tax income + interest expense + income taxes interest expense You have obtained the following median industry ratios for analyzing the results: Ratio Median Industry Ratio Current... Quick Accounts receivable turnover. Days' receivables.. Inventory turnover Days' inventory, Asset turnover...... Income to net worth......... Income to total assets. Liabilities to net worth.. Liabilities to total assets.. 1.90 .90 10.43 35.00 5.85 62.39 2.83 .12 .05 1.11 .53 3.00 Times interest earned....... Calculate the ratios on a separate part of the worksheet. Set up the formulas, entering the correct spreadsheet cells. Use the following headings: Median Ratio 2008 2009 Industry Peach Blossom Cologne Company Working Trial Balance-Balance Sheet 12-31-09 Per Working Per Paper Audit Books Reference 12-31-08 12-31-09 Assets: 101 Cash-Big City National Bank 105 Accounts receivable 106 Allowance for bad debts 109 Inventory 210 Land 220 Buildings 221 Accum. depn.- buildings 230 Machinery and equipment 231 Accum. depn.- mach.& equip. 240 Automotive equipment 339415 420678 124021 235380 (10485) (4800) 777152 600580 82250 82250 276263 276263 (65416) (74625) 540845 737045 (160866) (185939) 99425 118925 241 Accum. depn.- auto. equip. (52798) (81892) 250 Office furniture & fixtures 106433 113233 251 Accum. depn.- off. fum.& fix. (37581) (43073) Total assets 2018658 2194025 Liabilities: 301 Accounts payable 223161 176790 305 Accrued interest 10625 8750 306 Dividends payable 15725 15725 307 Federal income tax payable 23023 25000 308 Notes payable-short term 125000 401 Notes payable-long term 150000 Total liabilities 397534 376265 Owners' Equity: 501 Common stock 925000 925000 505 Other contributed capital 95979 95979 601 Retained earnings 429855 600145 605 Dividends (15725) (15725) 610 Current net income 186015 212361 Total owners' equity 1621124 1817760 Total liabilities & owners' equity 2018658 2194025 TB-BS Per Reclassification Adjustments Audit Items Financial Statements Debit Credit 12-31-09 Debit Credit 12-31-09 Working Per Per Paper Audit Books Reference 12-31-08 12-31-09 REVENUE: 701 Sales 3447472 3857549 703 Sales Returns & Allowances (26530) (28318) 3420942 3829231 EXPENSES: 1420933 1651366 Net Sales 801 Cost of Goods Sold Gross Margin OPERATING EXPENSES: 820 Wage and Salary Expense 2000009 2177865 1418720 1487700 821 Payroll Tax Expense 99310 105924 822 Depreciation Expense 64422 76368 823 Rent Expense 3750 3750 824 Office Supplies Expense 8615 10825 825 Small Tools Expense 2988 5650 826 Advertising Expense 6313 7980 827 Insurance 15737 22415 828 Repairs and Maintenance 17869 16222 829 Property Tax 13463 17100 830 Utilities 10670 14325 831 Professional Fees 26875 35875 832 Miscellaneous Expense 302 1771 834 Freight Expense 833 Provision for Bad Debts Total Operating Expenses 9925 8650 28150 32386 1727109 1846941 Net Income From Operations 272900 330924 OTHER INCOME (EXPENSE): 901 Interest Expense (27500) (14063) 930 Gain(Loss) Sale of Fixed Assets 18638 (4500) 950 Miscellaneous Income 0 0 Net Other Income (8862) [18563) Net Income Before Taxes 264038 312361 940 Federal Income Tax 78023 100000 Net Income 186015 212361
Expert Answer:
Related Book For
Auditing a risk based approach to conducting a quality audit
ISBN: 978-1133939153
9th edition
Authors: Karla Johnstone, Audrey Gramling, Larry Rittenberg
Posted Date:
Students also viewed these finance questions
-
You have been hired as a consultant for Pristine Urban - Tech Zither, Incorporated ( PUTZ ) , manufacturers of fine zithers. The market for zithers is growing quickly. The company bought some land...
-
Managing Scope Changes Case Study Scope changes on a project can occur regardless of how well the project is planned or executed. Scope changes can be the result of something that was omitted during...
-
The Crazy Eddie fraud may appear smaller and gentler than the massive billion-dollar frauds exposed in recent times, such as Bernie Madoffs Ponzi scheme, frauds in the subprime mortgage market, the...
-
In Exercises find the derivative of the function. y = x(x + 1)
-
Given the following information: a. Rank the portfolios on RVAR. b. Rank the portfolios on RVOL. c. Rank the portfolios on alpha. d. Which portfolio had the smaller nonsystematic risk? e. Which...
-
For the tape of Problems 6.8 through 6.11, determine the true horizontal length of the slope distance BC for the conditions shown in Problems 6.12 through 6.13. (Assume the tape was fully supported...
-
Varcore Inc. is currently acquiring a key component from its sister company, Farcore Inc. at a transfer price of \($10\) per unit. Farcores variable cost of purchasing the unit is \($4\), and its...
-
Limerick Enterprises, Inc., is considering building a manufacturing plant in Dublin. Predicting sales of 100,000 units, Limerick estimates the following expenses: An Irish firm that specializes in...
-
A university conducted a survey of 383 undergraduate students regarding satisfaction with student government. Results of the survey are shown in the table by class rank. Complete parts (a) through...
-
Edgeworth Co. has an all-cash policy and sells 50 units per month at $920 a unit. The variable cost is $700 a unit. Should the firm grant 30 days of credit, it expects its sales would rise to 60...
-
Byron Ltd commenced business on 1 January making one product only. The budgeted cost of one unit of the product is as follows: Direct labour Direct material Variable production overhead Fixed...
-
10 (a) Prove that the intrinsic equation of the cycloid x = a(0+sine), y=a(1-cose) is s=4asine (b) Find the envelope of the family of straight lines joining the extremities of a pair of conjugate...
-
Suppose that the market price of a bond, which pays coupon semiannually, is currently 900. Suppose that this pricing corresponds to the (promised) yield to maturity (YTM) of 10%. The calculated...
-
Briefly explain why CAPM includes only the systematic risk (beta risk) while ignoring the unsystematic risk.
-
Explain the evolution of contemporary cognitive psychology 2. evaluate the major theoretical and biological underpinnings of human perception, attention, memory, reasoning, language, and learning 3....
-
Locate geographically the ideal spot for the warehouses taking into account the location of each physical store (Stockholm, Palermo and Vienna) whilst also considering that CERAMICOSA must be able to...
-
The rate at which the temperature of an object changes is proportional to the difference between its own temperature and the temperature of the surrounding medium. Express this rate as a function of...
-
In Cleo Company, the predetermined overhead rate is 80% of direct labor cost. During the month, \($210,000\) of factory labor costs are in- curred, oi which \($180,000\) is direct labor...
-
Critically evaluate the results of the empirical tests of Nobess proposed classification scheme.
-
In BAC Company, Job No. 26 is completed at a cost of \($4,500\) and later sold for \($7,000\) cash. A correct entry is: (a) Debit Finished Goods Inventory \($7,000\) and credit Work in Process...
Study smarter with the SolutionInn App