Problem 1: Constructing an income statement

Using the income and expense account information for Egelloc Products Inc. listed below, construct an income statement for the year ended December 31, 2018.

Shares outstanding: 1,575,000

Tax rate: 35%

Interest expense: $3,540,000

Revenue: $950,500,000

Depreciation: $50,000,000

Selling, general and administrative expense: $85,000,000

Other income: $1,350,000

Research and development: $5,200,000

Cost of goods sold: $730,000,000

Problem 2: Constructing a balance sheet

Construct Egellocs 2018 year-end balance sheet i.e., using the asset, liability and equity accounts listed below.

Retained earnings: $60,500,000

Accounts payable: $57,000,000

Accounts receivable: $43,000,000

Common stock: $189,676,000

Cash: $6,336,000

Short term debt: $1,500,000

Inventory: $42,000,000

Goodwill: $30,000,000

Long term debt: $74,000,000

Other non-current liabilities: $15,000,000

PP&E: $225,000,000

Other non-current assets: $14,000,000

Long-term investments: $25,340,000

Other current assets: $12,000,000

Problem 3: Common-size statements

Restate Egellocs 2018 financial statements as common-size statements and comment on them.

Problem 4: Ratio analysis

Using the 2018 income statement and balance sheet of Egelloc Products Inc., as constructed in problems 1 and 2 (above), compute Egellocs financial ratios. How is the firm doing relative to its industry (shown below) i.e., in the areas of liquidity, asset management, leverage and profitability?

Current ratio: 2.200

Quick ratio: 1.500

Cash ratio: 0.135

Debt ratio: 0.430

Cash coverage: 10.600

Days sales in receivables: 29.000

Total asset turnover: 2.800

Inventory turnover: 20.100

Days sales in inventory: 11.500

Receivables turnover: 32.000

Profit margin: 0.045

Return on assets: 0.126

Return on equity: 0.221