Corporate Tax Liability and Balance Sheet Analysis

Ratio analysis provides useful information for a companys operations and financial conditions. Conducting analysis in a mechanical, unthinking manner is dangerous, but when the ratio analysis is used with good judgment, it can provide useful insights into a firms operations and identify the right questions to ask.

In this competency assessment, you address the time value of money also known as discounted cash flow analysis. This type of analysis is crucial to being able to viably analyze financial statements.

Problems:

1. Complete problem: Total Net Operating Capital
   • XYZ, Inc. reported $20 million in operating current assets, $25 million in net fixed assets, and $6 million in operating current liabilities. How much total net operating capital does XYZ, Inc. have?
   • Show your work.

2. Complete problem: Balance Sheet Analysis
   • Complete the balance sheet and sales information in the table that follows for XYZ, Inc., using the following financial data:
   • Show your work.

Total assets turnover: 1.5

Gross profit margin on sales: (Sales Cost of goods sold)/Sales = 25%

Total liabilities-to-assets ratio: 40%

Quick ratio: 0.80

Days sales outstanding (based on 365-day year): 36.5 days

Inventory turnover ratio: 3.75

Partial Income Statement Information

	Sales
	Costs of goods sold

Balance Sheet Information

	Cash				Accounts payable
	Accounts receivable				Long-term debt		50,000
	Inventories				Common Stock
	Fixed Assets				Retained earnings		100,00
	Total Assets		$400,00		Total liabilities and equity