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c) Calculate the debt-equity ratio. What does the number tell us about the future of the business and why? [3] d) Use the Income Statement
c) Calculate the debt-equity ratio. What does the number tell us about the future of the business and why? [3] d) Use the Income Statement below to calculate the return on sales. Explain what this means. Use the link in the class notes to compare this value to the industry standard. What does it say about this firm? [4] Previous Year 290,000 (110,000) 180,000 Gary's Garden Furniture Income Statement Year to December 31 Last Year Sales 350,000 Cost of Goods Sold (125,000) Gross Profit 225,000 OPERATING EXPENSES Salaries 110,000 Rent 7000 Utilities 2,000 Bad Deb: Provision 4,000 Depreciation (8.000) Total Operating Expenses 131,000 OPERATING INCOME 94,000 NON-OPERATING OR OTHER EXPENSES Interest Revenues 1000 Gains 2.000 Interest Expense (1.000) (1000) Losses Total Non-Operating 1,000 NET INCOME 95,000 105,000 7,000 1,500 3,000 (7.000) 123,500 56,500 2000 (1.000) (1000) o 56,500 1 2. Operations management a) In services, customers are involved in the production process. Give your this and explain a problem that it creates for the firm. What is the solutio problem? 15)
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