Question: Using the Exhibit A document, compute the following ratio, compare it to the industry average, and comment. Compute the current ratio . Compute the quick
Using the Exhibit A document, compute the following ratio, compare it to the industry average, and comment.
Compute the current ratio.
Compute the quick ratio.
Compute days in inventory.
Compute days outstanding in accounts receivable.
Compute the gross margin.
Compute the net income percentage.
Compute the long term debt to equity ratio.
Compute the interest coverage.
Compute the ROA
Compute the ROE.
Compute the ROE using the DuPont Model.
Exhibit A
James Trading Corporation
Balance Sheet
December 31, 20XX
Assets
$
Liabilities and Equity
$
Cash
23,015
Accounts receivable
141,258
Accounts payable
184,372
Inventory
212,444
Long term debt
168,022
Total current assets
376,717
Total liabilities
352,394
Net Plant and equipment
711,256
Common Stock
313,299
Other assets
89,879
Retained earnings
512,159
Total equity
825,458
Total Assets
$1,177,852
Total Liabilities and Equity
$1,177,852
James Trading Corporation
Income Statement
December 31, 20XX
Income Statement
$
Sales
$2,130,000
Cost of goods sold
(1,015,000)
Gross margin
1,115,000
Operating expenses
(878,000)
Depreciation
(16,030)
Operating income
220,970
Interest expense
(10,011)
Earnings before taxes
210,959
Income taxes
(54,000)
Net income
$156,959
Industry Average Ratios
Item
Ration
Current ratio
2.1
Quick ratio
0.8
Days in inventory
92
Days in accounts receivable
63
Gross margin
23.9%
Net margin
12.3%
Long term debt to equity ratio
1.0
Interest coverage
5.6
ROA
5.3%
ROE
18.8%
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