BUSI 320 Comprehensive Problem 1 latest 2016

BUSI 320 Comprehensive Problem 1 2016 Summer B

Use the following information to answer the questions on page 2 below:

(note: all sales are credit sales)

Income Stmt info: 2014 2015

Sales $ 1,050,000 $ 1,102,500

less Cost of Goods Sold: 325,000 351,000

Gross Profit 725,000 751,500

Operating Expenses 575,000 609,500

Earnings before Interest & Taxes 150,000 142,000

Interest exp 25,000 30,000

earnings before Taxes 125,000 112,000

Taxes 50,000 44,800

Net Income $ 75,000 $ 67,200

Balance Sheet info: 12/31/2014 12/31/2015

Cash 60,000 $ 57,000

Accounts Receivable 80,000 $ 80,800

Inventory 110,000 $ 121,000

Total Current Assets $ 250,000 $ 258,800

Fixed Assets (Net) $ 300,000 $ 318,000

Total Assets $ 550,000 $ 576,800

Current Liabilities $ 130,000 $ 149,500

Long Term Liabilities $ 150,000 $ 140,000

Total Liabilities $ 280,000 $ 289,500

Stockholder's Equity $ 270,000 $ 287,300

Total Liab & Equity: $ 550,000 $ 576,800

Compute each of the following ratios for 2014 and 2015 and

indicate whether each ratio was getting "better" or "worse" from 2014 to 2015

and was "good" or "bad" when compared to the Industry Avg in 2015

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

2014 2015 Getting Better or Getting Worse? 2015 Industry Avg "Good" or "Bad" compared to Industry Avg

Profit Margin 0.11

Current Ratio 1.90

Quick Ratio 1.12

Return on Assets .26

Debt to Assets .55

Receivables turnover 18.00

Avg. collection period* 21.20

Inventory Turnover** 8.25

Return on Equity 0.25

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)