Question
Blue owns Blues Bistro. He thinks he has performed well in 2011 and he is trying to analyze the Bistros performance for the year, but
Blue owns Blues Bistro. He thinks he has performed well in 2011 and he is trying to analyze the Bistros performance for the year, but he needs your help!Following are Blues condensed income statement, and statement of retained earnings and investor information for 2010 and 2011.
BLUES BISTRO
Condensed Income Statement and
Statement of Retained Earnings and Investor Information
For the Periods Ending December 31, 2010 and 2011
2010
2011
Income Statement
Sales
552,500
742,205
Cost of Sales
227,075
259,800
Gross Profit
325,425
482,405
Operating Expenses (excluding depreciation)
160,225
280,275
Depreciation
60,000
59,000
Operating Income (EBIT)
105,200
143,130
Interest
34,000
15,863
Income Before Income Taxes
71,200
127,267
Income Taxes (40%)
28,480
50,907
Net Income
42,720
76,360
Statement of Retained Earnings and Investor Information
Retained Earnings
Retained Earnings, Beginning
154,480
177,200
Net Income
42,720
76,360
Subtotal
197,200
253,560
Cash Dividends Paid
20,000
50,000
Retained Earnings, Ending
177,200
203,560
Investor Information
Market Price per Share
$10.00
$65.00
Earnings per Share
$ 1.42
$ 6.07
Following are the 2010 and 2011 balance sheets for Blues Bistro.
BLUES BISTRO
Balance Sheets
December 31, 2010 and 2011
2010
2011
Assets
Current Assets
Cash
42,000
30,000
Marketable Securities
93,000
80,000
Net Receivables
138,000
152,000
Inventories
5,000
6,000
Total Current Assets
278,000
268,000
Property and Equipment
1,200,000
1,091,760
Less Accumulated Depreciation
200,000
141,000
Net Property and Equipment
1,000,000
950,760
Total Assets
1,278,000
1,218,760
Liabilities and Owners Equity
Current Liabilities
Accounts Payable
107,000
45,000
Notes Payable
15,000
59,000
Accrued Wages
38,000
23,000
Total Current Liabilities
160,000
127,000
Long-Term Liabilities
Long-Term Debt
340,800
138,200
Total Liabilities
500,800
265,200
Owners Equity
Capital Stock
600,000
750,000
Retained Earnings
177,200
203,560
Total Owners Equity
777,200
953,560
Total Liabilities and Owners Equity
1,278,000
1,218,760
Using Blues Bistro income statements and balance sheets, analyze the health of Blues Bistro by calculating the following ratios. Round to the hundredths place (i.e., 12.34% or 12.34 times).
Blues Bistro 2010
Blues Bistro 2011
Current Ratio
Quick Ratio
Inventory Turnover
(Assume inventories were $6,000 for 2009)
Property and Equipment Turnover
Times Interest Earned
Debt to Assets
Profit Margin
Return on Assets
Return on Equity
Price per Earnings Ratio
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Introduction to Managerial Accounting
Authors: Peter C. Brewer, Ray H. Garrison, Eric Noreen, Suresh Kalagnanam, Ganesh Vaidyanathan
5th Canadian edition
77429494, 1259105709, 1260480798, 978-1259105708
