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Income statement sales revenue 160, 000 less: cost of a good sold 106,000 gross profif 54, 000 es: operating expenses selling expenses 16,000 general and

Income statement

sales revenue

160, 000

less: cost of a good sold

106,000

gross profif

54, 000

es: operating expenses

selling expenses

16,000

general and administrative expenses

10,000

lease expense

1,000

depreceation expense

10,000

total operating expense

37,000

operating profit

17,000

es:interest expense

6,100

net profits before taxes

10,900

es:taxes

4,360

net profits after taxes

6,450

Balance sheet

Assets

cash

500

Marketable securities

1, 000

Accounts receivable

25,000

inventories

45,500

Total currents assets

72,000

Land

26,000

Buildings and equipment

90,000

Less: accumulated depreciation

38,000

Net fixed assets

78,000

Total assets

150,000

Liabilities and stockholders equity

Account payable

22,000

Notes payable

47,000

Total current liabilities

69,000

Log-term debt

22, 950

Common stock*

31,500

Retained earings

26,550

Total liabilities and stockholders equity

150,000

  • The firms 3,000 outstanding shares of common stock closed 2019 at a price of $25 per share

Instructions:

  1. Prepare a common-size statements for the Income Statement
  2. Use the preceding financial statements to complete the following table. Assume the industry averages given in the table are applicable for both 2018 and 2019
  3. Analyze the results and explain the company changes during both years.

Ratio

Industry average

Actual 2018

Actual 2019

Current ratio

1.80

1.84

Quick ratio

0.70

0.78

Inventory turover*

2.50

2.59

Number of days sales in inventory

37.5 days

36.5 days

Times Interest earned ratio

3.8

4.0

Gross profit margin

38%

40%

Net profit margin

3.5%

3.6%

Return on total assets

4.0%

4.0%

Return on common equity

9.5%

8.0

Market/bookratio

1.1

1.2

*Based on a 365-day year and on end-of-year figures.

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