Question
John Easterwood recently inherited a large sum of money and is considering the purchase of one of two family-owned companies for sale in his hometown
John Easterwood recently inherited a large sum of money and is considering the purchase of one of two family-owned companies for sale in his hometown of Eastaboga, Alabama. The two firms are the Ancel Grocery Store and Starks Furniture Store. The balance sheets and income statements for these firms are given below.
Ancel Grocery
Starks Furniture
Income statement
Net sales
1,200,000
200,000
Cost of goods sold
960,000
100,000
Gross profit
240,000
100,000
Operating expenses
210,000
32,000
Net Operating Income
30,000
68,000
Interest expenses
6,000
20,000
Profit before tax
24,000
48,000
Taxes
12,000
24,000
Net income
12,000
24,000
Balance sheet
Cash
30,000
15,000
Marketable securities
10,000
5,000
Accounts receivables
30,000
40,000
Inventory
20,000
60,000
Current assets
90,000
120,000
Net fixed assets
110,000
120,000
Total assets
200,000
240,000
Accounts payable
15,000
20,000
Notes payable
15,000
40,000
Current liabilities
30,000
60,000
Long term debt
25,000
30,000
Common stock
85,000
70,000
Retained earnings
60,000
80,000
Total liabilities & equity
200,000
240,000
Required Calculate Profitability, and Long run solvency ratios which firm is best
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Managerial Accounting
Authors: James Jiambalvo
7th Edition
1119577721, 978-1119577720
