Dear Students: Answer the following questions individually. Question1 (6 marks) (CLO 4) The following information is computed from Saied's company annual report for 2018. 2018 2017 Current assets $ 2,731,020 S 2,364,916 Property and equipment, net 10,960,286 8,516,833 Intangible assets, at cost less applicable amortization 255,919 $11,137,668 $13,986,081 Current liabilities $ 3,168,123 S 2,210,735 Deferred federal income taxes 160,000 26,000 Mortgage note payable 456,000 Stockholders' equity 10,201.958 8.900,933 S11.137,668 $13.986.081 Net sales $33,410,599 (30,168,715) $25,804,285 (23,159,745 Cost of goods sold Selling and administrative expense (2,000,000) (1,500,000) Interest expense (216,936) (39,456) Income tax expense (400,000) (300,000) Net income $ 624,948 S 805,084 Note: One-third of the operating lease rental charge was $100,000 in 2018 and $50,000 in 2017. Capitalized interest totaled $30,000 in 2018 and $20,000 in 2017. Required: a. Based on the above data for both years, compute for the two years 2018, and 2017 with explanation (give your comments on each ratio). 1. times interest earned 2. fixed charge 3. debt ratio 4. debt/equity ratio 5. debt to tangible net worth b. Comment on the firm's long-term borrowing ability based on the analysis. Question 2 (7.5 marks) (CLO 4) The balance sheet for Ahmed Company is shown below. Ahmed Company Balance Sheet 2017 Assets Liabilities and Equity Cash...................... $ 60,000 Accounts payable................. $ 220,000 Accounts receivable...... 240,000 Accrued taxes.... 30,000 Inventory............. 350,000 Bonds payable (long-term)... 150,000 Plant and equipment...... 410,000 Common stock. 80,000 Paid-in capital.. 200,000 Retained earnings................ 380,000 Total assets.... 1.060,000 Total liabilities and equity... S1,060,000 The Net Sales is 900,000, and Cost of Goods Sold is 400,000 for the year 2017, and the Beginning inventory 200,000, and Beginning Account Receivable is 150,000. Required: Compute the following ratios with explanation (give your comments on each ratio): a. Current ratio. b. Quick ratio(Acid-test ratio). c. Inventory Turnover in Days d. Accounts Receivable Turnover in days e. Operating Cycle Question 3 (6.5 marks) (CLO 4) The following ratios have been calculated for Al Manarah Oil and Gas Company for two years 2019-2018. Financial ratios 2019 2018 Leverage Debt ratio (%) Long-term debt to total capital (%) 70.2 60.0 3.2 68.1 67.5 3.1 Debt to equity (times) Times interest earned (times) Cash interest coverage (times) Fixed charge coverage (times) Cash flow adequacy (times) 0.4 1.1 Profitability Gross profit margin (%) 14.2 11.1 2.3 0.8 Operating profit margin (%) Net profit margin (%) (1.4) (3.1) Cash flow margin (%) 9.1 4.3 Return on assets (%) Return on equity (%) (0.7) (2.1) (3.1) (9.8) 8.7 5.7 Cash return on assets (%) Instructions: You are an analyst and investors ask you to analyze the capital structure, long-term solvency, and profitability of Al Manarah Oil and Gas Company, and give them a feedback regarding the decision to invest in this company or not. Good luck
