Question
Given the balance sheet and income statement for AAA Company . AAA COMPANY Balance Sheet Assets Liabilities Cash $ 15,000 Accounts Payable $ 21,000 Accts.
Given the balance sheet and income statement for AAA Company.
AAA COMPANY Balance Sheet
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Assets | Liabilities |
|
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Cash | $ 15,000 | Accounts Payable | $ 21,000 |
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Accts. Receivable | 22,000 | Notes Payable | 20,000 |
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Inventory | 30,000 | Accrued Expenses | 5,000 |
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Current Assets | 67,000 | Current Liabilities | 46,000 |
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Net Fixed Assets | 73,000 | Long-term Debt | 30,000 |
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|
| Stockholders' Equity | 64,000
|
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Total Assets | $140,000 | Total Liabilities & Stockholders' Equity | $140,000
|
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Income Statement
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Sales (80% credit) |
| $120,000 |
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Less: Cost of Goods Sold |
| 45,000 |
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Gross Profit |
| 75,000 |
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Selling and Administrative Expense | 20,000 |
|
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Rent Expense (Lease) | 8,000 | 28,000 |
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EBIT |
| 47,000 |
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Interest Expense |
| 5,000 |
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Earnings before taxes |
| 42,000 |
| ||||
Taxes (@ 25%) |
| 10,500 |
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Net Income |
| $ 31,500 |
| ||||
|
|
|
| ||||
Common shares outstanding |
| 15,000 |
| ||||
EPS |
| $ 2.10 |
| ||||
REQUIRED :
Compute the ratios that are also shown for the BBB company. The "right answer" refers to the question of whether a particular ratio for Simmons is better or worse than the industry average.
` | Ratios for AAA Com. ???
| Ratios for BBB Com. (given) | Better (B) or Worse (W) ??? |
Profit margin |
| 17.5% |
|
Return on assets |
| 20.8% |
|
Return on equity |
| 35% |
|
Receivables turnover |
| 4.4x |
|
Avg. collection period |
| 68.0 days |
|
Inventory turnover |
| 3.5x |
|
Fixed asset turnover |
| 2.4x |
|
Total asset turnover |
| .76x |
|
Current ratio |
| 1.28 |
|
Quick ratio |
| .85 |
|
Debt to total assets |
| .45 |
|
Times interest earned |
| 12.0x |
|
Fixed charge coverage |
| 3.6x |
|
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