The Rusty Inn commenced operations on January 1, 20X1, and has been operating for two years. Assume you are the new assistant manager and desire to gain some insight into financial relationships of your new employer. Balance sheets and condensed income statements for the first two years are provided below.
Balance Sheets Rusty Inn December 31, 20X1 and 20X2 20X1 20X2 Assets Current Assets Cash $ 10,000 $ 15,000 Marketable Securities 20,000 50,000 Accounts Receivable 45,000 60,000 Inventories 10,000 12,000 Total Current Assets 85,000 137,000 Property and Equipment Land 100,000 100,000 Building (net) 1,950,000 1,900,000 Furniture & Equipment (net) 240,000 200,000 Total Property & Equipment 2,290,000 2,200,000 Total Assets $2,375,000 $2,337,000 Liabilities and Owners’ Equity Current Liabilities $ 655,000 $ 60,000 Long-Term Debt 1,300,000 1,230,000 Total Liabilities 1,355,000 1,290,000 Owners’ Equity Common Stock 1,000,000 1,000,000 Retained Earnings 20,000 47,000 Total Owners’ Equity 1,020,000 1,047,000 Total Liabilities and Owners’ Equity $2,375,000 $2,337,000 Condensed Income Statements Rusty Inn For the years ended December 31, 20X1, and 20X2 20X1 20X2 Sales $1,200,000 $1,500,000 Operated Department Expense 600,000 750,000 Operated Department Income 600,000 750,000 Undistributed Operating Expenses 400,000 450,000 Total Income Before Fixed Charges 200,000 300,000 Fixed Charges 160,000 180,000 Income Taxes 10,000 60,000 Net Income $ 30,000 $ 60,000 Required:
1. Calculate the following ratios for both years:
Acid-test ratio Debt-equity ratio Average income tax rate . Operating efficiency ratio Or 2 Poo Profit margin 2. Also calculate for 20X2 the following ratios:
Property and equipment turnover ratio Total assets turnover ratio Accounts receivable turnover ratio Number of days accounts receivable outstanding Return on total assets op hoAnReturn on owners’ equity