Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Holister Electric was able to find financial statements of another company, Stark Supplies Inc., that operates in the same industry. The comparative income statement and
Holister Electric was able to find financial statements of another company, Stark Supplies Inc., that operates in the same industry. The comparative income statement and balance sheet of this company is shown below. | ||||||||
Stark Supplies Inc. | ||||||||
Income Statement | ||||||||
For the Year Ended December 31 | ||||||||
2021 | 2020 | |||||||
Sales Revenue | $896,000 | $960,000 | ||||||
Less Cost of Goods Sold | 358,400 | $384,000 | ||||||
Gross Profit | 537,600 | 576,000 | ||||||
Operating Expenses | ||||||||
Operating Expenses | $345,000 | $472,000 | ||||||
Interest Expense | $125,000 | $74,000 | ||||||
Depreciation Expense | 22,400 | $18,600 | ||||||
Total Operating Expenses | 492,400 | 564,600 | ||||||
Income from Operations | 45,200 | 11,400 | ||||||
Income Tax Expense | 12,204 | 3,078 | ||||||
Net Income | 32,996 | 8,322 | ||||||
Stark Supplies Inc. | ||||||||
Comparative Balance Sheet | ||||||||
As at December 31 | ||||||||
2021 | 2020 | |||||||
Assets | ||||||||
Current Assets | ||||||||
Cash | $285,000 | $298,000 | ||||||
Accounts Receivable | 187,500 | 119,100 | ||||||
Prepaid Insurance | 50,000 | 60,000 | ||||||
Inventory | 90,000 | 80,000 | ||||||
Total Current Assets | $612,500 | $557,100 | ||||||
Non-Current Assets | ||||||||
Property, Plant & Equipment | 475,000 | 475,000 | ||||||
Accumulated Depreciation | (234,400) | -212,000 | ||||||
Total Non-Current Assets | 240,600 | 263,000 | ||||||
Total Assets | $853,100 | $820,100 | ||||||
Liabilities | ||||||||
Current Liabilities | ||||||||
Accounts Payable | 91,200 | 86,300 | ||||||
Unearned Revenue | 26,100 | 24,310 | ||||||
Total Current Liabilities | $117,300 | $110,610 | ||||||
Non-Current Liabilities | ||||||||
Bank Loan | 82,000 | 78,000 | ||||||
Total Non-Current Liabilities | 82,000 | 78,000 | ||||||
Total Liabilities | 199,300 | 188,610 | ||||||
Shareholders' Equity | ||||||||
Common Shares | 165,000 | 149,000 | ||||||
Retained Earnings | 488,800 | 482,490 | ||||||
Total Shareholders' Equity | 653,800 | 631,490 | ||||||
Liabilities & Shareholders' Equity | $853,100 | $820,100 | ||||||
Using the income statement and balance sheet from Holister Electric and Stark Supplies, calculate the appropriate ratios to determine which company is doing better in the categories listed below. Round all ratios to 2 decimal places. Write your explanations in the textbox. |
b) liquidity for 2021 (current ratio, quick ratio, debt-to-equity) | |||||||||
7 Marks | 0 | ||||||||
Solve for current ratio, quick ratio, and debt-equity ratio, kindly should the math done to figure each? | |||||||||
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started