| | The balance sheet for Stud Clothiers is shown next. Sales for the year were $3,810,000, with 75 percent of sales sold on credit. | | STUD CLOTHIERS Balance Sheet 20XX | | Assets | Liabilities and Equity | | Cash | $ | 95,000 | Accounts payable | $ | 248,000 | | Accounts receivable | | 290,000 | Accrued taxes | | 143,000 | | Inventory | | 315,000 | Bonds payable (long-term) | | 168,000 | | Plant and equipment | | 453,000 | Common stock | | 100,000 | | | | | | | | | | | | Paid-in capital | | 150,000 | | | | | Retained earnings | | 344,000 | | | | | | | | | Total assets | $ | 1,153,000 | Total liabilities and equity | $ | 1,153,000 | | | | | | | | | | | Compute the following ratios: (Use a 360-day year. Do not round intermediate calculations. Round your answers to 2 decimal places. Input your debt-to-total assets answer as a percent rounded to 2 decimal places.) | | | | | | | a. | Current ratio | | times | | b. | Quick ratio | | times | | c. | Debt-to-total-assets ratio | | % | | d. | Asset turnover | | times | | e. | Average collection period | | days | | | Using the income statement for Times Mirror and Glass Co., compute the following ratios: | | TIMES MIRROR AND GLASS Co. Income Statement | | Sales | $ | 231,000 | | Cost of goods sold | | 138,000 | | | | | | Gross profit | $ | 93,000 | | Selling and administrative expense | | 43,900 | | Lease expense | | 11,800 | | | | | | Operating profit* | $ | 37,300 | | Interest expense | | 11,100 | | | | | | Earnings before taxes | $ | 26,200 | | Taxes (30%) | | 10,480 | | | | | | Earnings after taxes | $ | 15,720 | | | | | | *Equals income before interest and taxes. | | | | | | a. | Compute the interest coverage ratio. (Round your answer to 2 decimal places.) | | b. | Compute the fixed charge coverage ratio. (Round your answer to 2 decimal places.) | | Fixed charge coverage | | times | | The total assets for this company equal $171,000. Set up the equation for the Du Pont system of ratio analysis. | | c. | Compute the profit margin ratio. (Input your answer as a percent rounded to 2 decimal places.) | | d. | Compute the total asset turnover ratio. (Round your answer to 2 decimal places.) | | Total asset turnover | | times | | e. | Compute the return on assets (investment). (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.) | | Quantum Moving Company has the following data. Industry information also is shown. | | Company data | Industry Data on | | Year | Net Income | Total Assets | Net Income/Total Assets | | 2011 | $ | 487,000 | | $ | 2,821,000 | | | 14.8 | % | | | 2012 | | 473,000 | | | 3,254,000 | | | 7.4 | | | | 2013 | | 386,000 | | | 3,812,000 | | | 4.9 | | | | | | Year | Debt | Total Assets | Industry Data on Debt/Total Assets | | 2011 | $ | 1,676,000 | | $ | 2,821,000 | | | 52.3 | % | | | 2012 | | 1,762,000 | | | 3,254,000 | | | 46.0 | | | | 2013 | | 1,921,000 | | | 3,812,000 | | | 31.0 | | | | | | a. | Calculate the company's data in terms of: (Input your answers as a percent rounded to 1 decimal place.) | | | 2011 | 2012 | 2013 | | Net income/Total assets | % | % | % | | Debt/Total assets | % | % | % | | | | b. | As an industry analyst comparing the firm to the industry, are you likely to praise or criticize the firm in terms of: | | | Praise/Criticize | | Net income/Total assets | (Click to select)CriticizePraise | | Debt/Total assets | (Click to select)PraiseCriticize | | | The Canton Corporation shows the following income statement. The firm uses FIFO inventory accounting. | | CANTON CORPORATION Income Statement for 2013 | | Sales | $ | 236,800 | (14,800 units at $16.00) | | Cost of goods sold | | 148,000 | (14,800 units at $10.00) | | | | | | | Gross profit | $ | 88,800 | | | Selling and administrative expense | | 11,840 | | | Depreciation | | 11,600 | | | | | | | | Operating profit | $ | 65,360 | | | Taxes (30%) | | 19,608 | | | | | | | | Aftertax income | $ | 45,752 | | | | | | | | | | a. | Assume in 2014 the same 14,800-unit volume is maintained, but that the sales price increases by 10 percent. Because of FIFO inventory policy, old inventory will still be charged off at $10.00 per unit. Also assume selling and administrative expense will be 5 percent of sales and depreciation will be unchanged. The tax rate is 30 percent. Compute aftertax income for 2014. (Do not round intermediate calculations. Round your answer to the nearest whole number.) | | b. | In part a, by what percent did aftertax income increase as a result of a 10 percent increase in the sales price? (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.) | | Gain in aftertax income | % | | c. | Now assume that in 2015 the volume remains constant at 14,800 units, but the sales price decreases by 15 percent from its year 2014 level. Also, because of FIFO inventory policy, cost of goods sold reflects the inflationary conditions of the prior year and is $10.50 per unit. Further, assume selling and administrative expense will be 5 percent of sales and depreciation will be unchanged. The tax rate is 30 percent. Compute the aftertax income. (Round the sales price per unit to 2 decimal places but do not round any other intermediate calculations. Round your final answer to the nearest whole dollar amount.) | | | |
