Accounting Ratios
1.At the end of 2020, accounts receivable for Kopycat Interiors amounted to $238,000. At the begin- ning of the year it was $233,000. Net credit sales for the year amounted to $734,000 and net income was calculated to be $226,000. Determine the days sales outstanding ratio and the accounts receivable turnover ratio. Days Sales Outstanding = 2. At the beginning of 2020, Percolate Corp. had inventory of $368,000. During the year, it purchased $265,000 worth of raw materials and sold $580,000 worth of inventory. Determine the inventory turno- ver ratio and the days' sales in inventory. Days' Sales in Inventory = Inventory Turnover = 3. Presented below are select figures from the balance sheet of Newton Company for 2020 and 2019. Newton Company Balance Sheet As at February 28 2020 2019 Total Assets $289,238 $205,856 Total Liabilities $115,916 $63,949 Shareholders' Equity $173,322 $141,907 In 2020, Newton Company had sales of $466,000 and net income of $46,600. Calculate the ratios for 2020 as indicated below. Return on Assets (Percent): Answerl % Asset Turnover: Answerl times Debt-to-Equity (Decimal): Answerl Debt-to-Total-Assets (Percent): Answerl4. Battlecross Records reported the following. Sales $2,170,000 Cost of Goods Sold $680,000 Operating Expenses 377,000 Interest expense included in Operating Expenses $54,000 income Taxes 30% of income before tax Stockholders' Equity (Average) $16,000,000 a) Calculate net income. Net Income = $Answerl b) Calculate the net profit margin. Net Profit Margin = Answerl % c) Calculate the times interest earned. Times Interest Earned = Answerl times d) Calculate the return on equity. Return on Equity = Answerl % 5. The following financial statements are taken from the records of Organo Inc. a) Use horizontal analysis techniques to compare the changes between 2020 and 2019 balance sheet items. Organo Inc. Balance Sheet As at February 28 2020 2019 $ Change % Change Current Assets Cash $310,600 $324,000|$Answer Answer Accounts Receivable $159,200 $191,600 $Answer AnswerMerchandise Inventory $356,000 $387,500|$Answer Answer Short-Term Investments $127,000 $111,300 $Answer Answerl Total Current Assets $952,800 $1,014,400| $Answer Answer Long-Term Assets $430,300 $310,900 $Answer Answer % Total Assets $1,383, 100 $1,325,300 $Answer Answer Current Liabilities $308,200 $266,600 $Answer Answer % Long-Term Liabilities $134,90 $93,300 $Answer Answerl Total Liabilities $443,100 $359,900|$Answer Answer Shareholders' Equity $940,000 $965,400|$Answer Answerl Total Liabilities and Equity $1,383, 100|$1,325,300 $Answerl Answer % b) Perform a vertical analysis of the income statement for 2020, stating all income state- ment items as a percentage of net sales. Organo Inc. Income Statement For the Year Ended December 31 2020 Sales $701,000 Answer Cost of Goods Sold $245,350 Answer Gross Profit $455,650 Answer Operating Expenses Advertising Expense $3,400 Answer % Utilities Expense $8,000 Answer Rent Expense $4,200 Answer Salaries and Wages Expense $45,400 Answer Depreciation Expense $37,100 AnswerInterest Expense $7,300 Answer Total Expenses $105,400 Answer Income Before Income lax $350,250 Answer Income Tax Expense $ 105,075 Answer Net Income $245,175 Answer %
