Question
Consider the following financial data for Nguyen Corp.: Balance Sheet as of December 31, 2012 Cash & equivalents $ 128,000 Accounts payable $ 73,000 Accts.
Consider the following financial data for Nguyen Corp.:
Balance Sheet as of December 31, 2012 | ||||||
Cash & equivalents | $ | 128,000 | Accounts payable | $ | 73,000 | |
Accts. receivable | 206,500 | Notes payable | 160,500 | |||
Inventories | 138,500 | Accrued wages & taxes | 51,500 | |||
Total current assets | $ | 473,000 | Total current liabilities | $ | 285,000 | |
Long-term debt | 359,500 | |||||
Net plant & equip. | 889,500 | Common equity | 718,000 | |||
Total assets | $ | 1,362,500 | Total liab. & equity | $ | 1,362,500 | |
Profit & Loss Statement for 2012 | Industry Average Ratios | |||||
Sales revenue | $ | 1,744,000 | Current ratio | 1.9 | ||
Cost of goods sold | 1,360,500 | Quick ratio | 1.3 | |||
Gross profit | $ | 383,500 | Days sales outstanding | 33 days | ||
Operating expenses | 260,500 | Inventory turnover | 10.5 | |||
EBIT | $ | 123,000 | Total asset turnover | 1.6 | ||
Interest expense | 37,500 | Net profit margin | 1.7% | |||
Pre-tax income | $ | 85,500 | Return on assets | 2.8% | ||
Income taxes (30%) | 25,650 | Return on equity | 6.6% | |||
Net profit | $ | 59,850 | Debt ratio | 58% | ||
Compared to its competitors, Nguyen...
a. | converts its receivables to cash more quickly. | |
b. | generates more profit per dollar of total assets. | |
c. | finances a greater percentage of its assets with debt. | |
d. | has higher current and quick ratios. | |
e. | is using its total assets to generate sales more efficiently. |
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