Calculate (and document) suitable ratios with respect to of a) liquidity, b) solvency, c) profitability and d) efficiency BRIEFLY (maximum of 400 words) use these ratios to respond to the following 3 questions Long rambling answers will not be graded if you understand the ratios, you can be precise in answering If this company approached you to buy your product on your normal 30 day trade credit terms, would you extend them trade credit Justify your agreement to sell to them or not to sell to them using financial ratios If this firm approached you to lend them long term funds, would you advance funds to them Why or why not Explain and quantify why the percentage return on equity to shareholders is significantly higher than the percentage of operating return on assets used Data Set CUSABA INCORPORATED BALANCE SHEET AS AT DECEMBER 31, 2019 ASSETS LIABILITIES AND EQUITY Cash $18,000 Accounts Payable $75,000 Marketable Securities 5,000 Bank Loan 175,000 Accounts Receivable 450,000 Accrued Expenses 3,000 Inventory 325,000 Interest Payable 1,000 Prepaid Expenses 7,000 Long Term Bonds Payable 170,000 Property Plant and Equipment 165,000 Common Stock 176,000 Goodwill 30,000 Retained Earnings 400,000 Total Assets $1,000,000 Total Liabilities and Equity $1,000,000 CUSABA INCORPORATED INCOME STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2019 Sales (all on credit) $1,800,000 Cost of goods sold 1,200,000 Gross profit 600,000 Selling and admirative expense 250,000 Depreciation 20,000 Operating Income 330,000 Interest Expense 31,000 Earnings before taxes 299,000 Income Taxes 75,000 Net Income $224,000

The Answer is in the image, click to view ...

Answered step by step

Verified Expert Solution

Link Copied!

Question

1 Approved Answer

Posted on Sep 03, 2024

Calculate (and document) suitable ratios with respect to of a) liquidity, b) solvency, c) profitability and d) efficiency BRIEFLY (maximum of 400 words) use these

Calculate (and document) suitable ratios with respect to of a) liquidity, b) solvency, c) profitability and d) efficiency

BRIEFLY (maximum of 400 words) use these ratios to respond to the following 3 questions. Long rambling answers will not be graded if you understand the ratios, you can be precise in answering.

If this company approached you to buy your product on your normal 30-day trade credit terms, would you extend them trade credit. Justify your agreement to sell to them or not to sell to them using financial ratios

If this firm approached you to lend them long term funds, would you advance funds to them. Why or why not.

Explain and quantify why the percentage return on equity to shareholders is significantly higher than the percentage of operating return on assets used.

Data Set

**CUSABA INCORPORATED - BALANCE SHEET AS AT DECEMBER 31, 2019**
ASSETS		LIABILITIES AND EQUITY
Cash	$18,000	Accounts Payable	$75,000
Marketable Securities	5,000	Bank Loan	175,000
Accounts Receivable	450,000	Accrued Expenses	3,000
Inventory	325,000	Interest Payable	1,000
Prepaid Expenses	7,000	Long Term Bonds Payable	170,000
Property Plant and Equipment	165,000	Common Stock	176,000
Goodwill	30,000	Retained Earnings	400,000
Total Assets	$1,000,000	Total Liabilities and Equity	$1,000,000

**CUSABA INCORPORATED - INCOME STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2019**

Sales (all on credit)	$1,800,000
Cost of goods sold	1,200,000
Gross profit	600,000
Selling and admirative expense	250,000
Depreciation	20,000
Operating Income	330,000
Interest Expense	31,000
Earnings before taxes	299,000
Income Taxes	75,000
Net Income	$224,000