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Exercise 15-6 Selected Financial Ratios [LO3, LO4] Recent financial statements for Madison Company follow: Madison Company Balance Sheet June 30 Assets Current assets: Cash $
Exercise 15-6 Selected Financial Ratios [LO3, LO4]
Recent financial statements for Madison Company follow: |
Madison Company Balance Sheet June 30 | ||||||
Assets | ||||||
Current assets: | ||||||
Cash | $ | 21,000 | ||||
Accounts receivable, net | 160,000 | |||||
Merchandise inventory | 300,000 | |||||
Prepaid expenses | 9,000 | |||||
Total current assets | 490,000 | |||||
Plant and equipment, net | 810,000 | |||||
Total assets | $ | 1,300,000 | ||||
Liabilities and Stockholders' Equity | ||||||
Liabilities: | ||||||
Current liabilities | $ | 200,000 | ||||
Bonds payable, 10% | 300,000 | |||||
Total liabilities | 500,000 | |||||
Stockholders equity: | ||||||
Common stock, $5 par value | $ | 100,000 | ||||
Retained earnings | 700,000 | |||||
Total stockholders equity | 800,000 | |||||
Total liabilities and stockholders' equity | $ | 1,300,000 | ||||
Madison Company Income Statement For the Year Ended June 30 | |||
Sales | $ | 2,100,000 | |
Cost of goods sold | 1,260,000 | ||
Gross margin | 840,000 | ||
Selling and administrative expenses | 660,000 | ||
Net operating income | 180,000 | ||
Interest expense | 30,000 | ||
Net income before taxes | 150,000 | ||
Income taxes | 45,000 | ||
Net income | $ | 105,000 | |
Account balances at the beginning of the companys fiscal year were: accounts receivable, $140,000; and inventory, $260,000. All sales were on account. |
Required: |
Compute financial ratios as follows: |
1. | Gross margin percentage. (Omit the "%" sign in your response.) |
Gross margin percentage | % |
2. | Current ratio. (Round your answer to 2 decimal places.) |
Current ratio |
3. | Acid-test ratio. (Round your answer to 2 decimal places.) |
Acid-test ratio |
4. | Average collection period. (Use 365 days in a year. Round your answer to 1 decimal place.) |
Average collection period | days |
5. | Average sale period. (Use 365 days in a year. Do not round intermediate calculations. Round your answer to 1 decimal place.) |
Average sale period | days |
6. | Debt-to-equity ratio. (Round your answer to 2 decimal places.) |
Debt-to-equity ratio |
7. | Times interest earned. (Round your answer to 1 decimal place.) |
Times interest earned |
8. | Book value per share. (Omit the "$" sign in your response.) |
Book value | $ per share |
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