FINANCE-BUSI 320 Comprehensive Problem 1 Version FALL D

BUSI 320 Comprehensive Problem 1 Version FALL D

Use the following information to answer the questions below:

note: all sales are credit sales

Income Stmt info:

2013

2014

Sales

$ 1,050,000

$ 1,181,250

less Cost of Goods Sold:

325,000

346,125

Gross Profit

725,000

835,125

Operating Expenses

575,000

609,500

Earnings before Interest & Taxes

150,000

225,625

Interest exp

25,000

31,000

earnings before Taxes

125,000

194,625

Taxes

50,000

77,850

Net Income

$ 75,000

$ 116,775

Balance Sheet info:

12/31/2013

12/31/2014

Cash

60,000

$ 63,600

Accounts Receivable

80,000

$ 87,200

Inventory

110,000

$ 122,100

Total Current Assets

$ 250,000

$ 272,900

Fixed Assets (Net)

$ 300,000

$ 312,000

Total Assets

$ 550,000

$ 584,900

Current Liabilities

$ 130,000

$ 149,500

Long Term Liabilities

$ 150,000

$ 170,000

Total Liabilities

$ 280,000

$ 319,500

Stockholder's Equity

$ 270,000

$ 265,400

Total Liab & Equity:

$ 550,000

$ 584,900

Compute each of the following ratios for 2013 and 2014 and

indicate whether each ratio was getting "better" or "worse" from 2013 to 2014

and whether the 2014 ratio was "good" or "bad" compared to the Industry Avg.

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

2013

2014

Getting Better or Getting Worse?

2014 Industry Avg

"Good" or "Bad" compared to Industry Avg

Profit Margin

0.09

Current Ratio

1.80

Quick Ratio

1.12

Return on Assets

.18

Debt to Assets

.49

Receivables turnover

12.00

Avg. collection period*

22.10

Inventory Turnover**

8.25

Return on Equity

0.35

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)