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Financial Rations Instructions: Use the financial statements provided below to calculate the following financial ratios: write your own assessment of the company's financial performance, using
Financial Rations
Instructions: Use the financial statements provided below to calculate the following financial ratios: write your own assessment of the company's financial performance, using those ratios to support your conclusion. What can you conclude about the company's liquidity, solvency, and profitability? Be sure to include the ratios calculations to support your conclusions.
| 2012 | 2011 | ||
| 1. Current Ratio | |||
| 2. Quick Ratio | |||
| 3. Long-Term Debt-to-Equity Ratio | |||
| 4. Debt-to-Equity Ratio | |||
| 5. Long-Term Debt Ratio | |||
| 6. Accounts Receivable Turnover Ratio (Assume that 60% of Sales are credit) | |||
| 7. Inventory Turnover Ratio (Assume 2011 beginning inventory was -0-.) | |||
| 8. Asset Turnover Ratio | |||
| 9. Gross Profit Percentage | |||
| 10. Net Profit Margin Percentage | |||
| 11. Return on Assets | |||
| 12. Return on Equity | |||
| Get Your Motor Runnin' | ||
| Comparative Balance Sheets | ||
| 2012 | 2011 | |
| Assets | ||
| Current Assets | ||
| Cash | $198,456 | $147,333 |
| Accounts Receivable | 4,000 | 5,000 |
| Allowance for Uncollectible Accounts | (250) | 80 |
| Supplies | 200 | 250 |
| Inventory | 35,000 | 32,000 |
| Total current assets | 237,406 | 184,663 |
| Property, Plant, and Equipment | ||
| Equipment | 60,000 | 15,000 |
| Accumulated Depreciation - Equipment | (14,000) | (1,000) |
| Vehicles | 35,000 | 35,000 |
| Accumulated Depreciation - Vehicles | (4,800) | (2,400) |
| Building | 684,375 | 684,375 |
| Accumulated Depreciation - Building | (25,000) | (12,500) |
| Land | 46,875 | 46,875 |
| Land Improvements | 23,750 | 23,750 |
| Accumulated Depreciation - Land Improvements | (2,539) | (663) |
| Total PP&E | 803,661 | 788,437 |
| Total Assets | $1,041,067 | $973,100 |
| Liabilities and Stockholders' Equity | ||
| Current Liabilities | ||
| Accounts Payable | $20,000 | $24,000 |
| Wages Payable | 1,000 | 500 |
| Warranties Payable | 750 | 500 |
| Notes Payable | 0 | 2,500 |
| Total current liabilities | 21,750 | 27,500 |
| Long-term Liabilities | ||
| Bonds Payable | 750,000 | 450,000 |
| Mortgage Payable | 0 | 300,000 |
| Total long-term liabilities | 750,000 | 750,000 |
| Total liabilities | 771,750 | 777,500 |
| Stockholders' Equity | ||
| Common Stock | 125,000 | 125,000 |
| Paid-in capital in excess of par - common | 25,000 | 25,000 |
| Preferred Stock | 40,000 | 20,000 |
| Paid-in capital in excess of par - preferred | 25,000 | 15,000 |
| Less: Treasury Stock | (3,000) | (3,000) |
| Paid-in capital - treasury stock | 500 | 500 |
| Retained Earnings | 56,817 | 13,100 |
| Total stockholders' equity | 269,317 | 195,600 |
| Total liabilities and stockholders' equity | $1,041,067 | $973,100 |
| Get Your Motor Runnin' | ||
| Comparative Income Statements | ||
| 2012 | 2011 | |
| Service Revenue | $93,693 | $50,230 |
| Sales | 76,250 | 24,000 |
| Cost of Goods Sold | (45,750) | (14,400) |
| Gross Margin | $124,193 | $59,830 |
| Operating Expenses: | ||
| Advertising Expense | $7,500 | $5,000 |
| Bad Debt Expense | 330 | 0 |
| Depreciation Expense - Equipment | 13,000 | 5,667 |
| Depreciation Expense - Vehicles | 2,400 | 2,400 |
| Depreciation Expense - Building | 12,500 | 12,500 |
| Depreciation Expense - Land Improvements | 1,876 | 663 |
| Wages Expense | 22,870 | 10,500 |
| Total Expenses | 60,476 | 36,730 |
| Net Income | $63,717 | $23,100 |
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