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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

Assets

Liabilities

Cash

$ 15,000

Accounts Payable

$ 21,000

Accts. Receivable

22,000

Notes Payable

20,000

Inventory

30,000

Accrued Expenses

5,000

Current Assets

67,000

Current Liabilities

46,000

Net Fixed Assets

73,000

Long-term Debt

30,000

Stockholders' Equity

64,000

Total Assets

$140,000

Total Liabilities & Stockholders' Equity

$140,000

Income Statement

Sales (80% credit)

$120,000

Less: Cost of Goods Sold

45,000

Gross Profit

75,000

Selling and Administrative Expense

20,000

Rent Expense (Lease)

8,000

28,000

EBIT

47,000

Interest Expense

5,000

Earnings before taxes

42,000

Taxes (@ 25%)

10,500

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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