Question
Instructions You are considering investing in Acme Incorporated. The company has provided you with the balance sheet and income statement for the previous year. The
Instructions
You are considering investing in Acme Incorporated. The company has provided you with the balance sheet and income statement for the previous year. The current price of one share of stock is $46.25.Earnings per share last year was $1.86.
For Question #1, calculate liquidity, debt, and profitability ratios. For Question #2, determine whether you would invest in Acme Incorporated.Be sure to incorporate the results of the ratios in your explanation.
- Calculate the requested financial ratios:
-Current ratio
-Debt-to-equity ratio
-Return on sales (use net income AFTER taxes)
-Return on equity (use net income AFTER taxes)
-Earnings per share (use net income AFTER taxes)
- Would you invest in Acme Incorporated? Why or why not?Incorporate the results of the ratios into your analysis.
Financial Statements
Acme Incorporated
Statement of Income
FY 20XX
REVENUES
Net Sales$4,090,970
Other Income+104,227
Total Revenue$4,195,197
COST OF GOODS SOLD$2,673,129
GROSS PROFIT (GROSS MARGIN)$1,522,068
OPERATING EXPENSES
Total Selling Expenses$333,300
Total General Expenses+ 306,036
Total Operating Expenses$639,336
NET INCOME BEFORE TAXES$882,732
Income Tax Paid (25%)$220,683
NET INCOME AFTER TAXES$662,049
Acme Incorporated
Balance Sheet
December 31, 20XX
ASSETS
Current Assets
Cash$280,928
Marketable Securities514,800
Accounts Receivable108,694
Notes Receivable855,771
Inventories218,156
Prepaid Expenses and Other88,237
Current Assets
Total Current Assets$2,066,586
Fixed Assets
Land$510,000
Plant and Buildings304,096
Equipment218,500
Total Fixed Assets$1,744,701
Other Assets
Goodwill, Net$49,930
Total Other Assets$49,930
TOTAL ASSETS$3,861,217
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable$226,977
Accrued Expenses and Other380,496
Current Liabilities
Current Portion of Finance Debt382,579
Total Current Liabilities$990,052
LongTerm Liabilities
Notes Payable$228,772
Bonds380,000
Other Long-Term Liabilities29,478
Total LongTerm Liabilities$638,250
Total Liabilities$1,628,303
Owner's Equity
Common Stock$389,538
(342,196 Shares Outstanding)
Retained Earnings1,843,377
Total Owners' Equity$2,232,915
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY$3,861,217
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Principles Of Fraud Examination
Authors: Joseph T Wells
2nd Edition
0470128836, 9780470128831
