nus Quly Help 1 8 02:00 wool Morksen Corp. has enjoyed modest success in penetrating the personal electronic devices market since it began operations a few years ago. A new line of devices introduced recently has been well received by customers. However, the company president, who is knowledgeable about electronics but not accounting, is concerned about the future of the company Although the company has a line of credit with the local bank, it currently needs cash to continue operations. The bank wants more Information before it extends the company's credit line. The president has asked you, as the company's chief accountant, to evaluate the company's performance by using appropriate financial statement analysis, and to recommend possible courses of action for the company. In particular, the president wants to know how the company can obtain additional cash. Summary financial statements for the past three years are available below. MORKSEN CORP. Consolidated Statement of Earnings For the Years Ended December 31, (in thousands of dollars) Sales 556,000 $45,000 Cost of sales 50.000 $3,000 Gross profit Operating expenses before interest and income taxes 8,000 7.400 Interest expense Earnings before income taxes Income tax expense Hot saring 3.2.240 Print References Year 2 Year $64.000 Year 14,000 13,000 36,000 10,800 6.620 3,180 1.780 4,220 1.300 $ 2,320 1.220 4.380 2.040 $ 2,140 Year 6 2-07 $1,000 740 5,140 7,220 14,100 MORKSEN CORP. Consolidated Statements of Financial Position At December 31, (in thousands of dollars) Year B Year 7 Assets Current assets Cash s 380 $ 480 Short-term investments 740 740 Accounts receivable Merchandise inventory 10,880 8,400 16.660 10,060 Total current assets 28,660 19,680 Property, plant, and equipment Land 4,000 4,000 Buildings and equipment 26,000 26,000 30,000 30,000 Less: Accumulated depreciation 8,940 7.440 Net property, plant, and equipment 21,060 22.560 Total assets $49,720 $42,240 Liabilities and Shareholders' Equity Current liabilities Bank loan $16,500 $11,400 Accounts payable 6,000 4,300 Other liabilities 1,640 1,600 Income tax payable 960 1,040 Total current liabilities 25, 100 18, 340 Shareholders' equity Common shares 20,000 20,000 Retained earningu 4,140 3,520 Other comprehensive income 480 2,000 18,000 20,000 5,760 14,240 $28,340 $ 2,880 1,500 1,000 5.380 20,000 2,640 320 Prav SI Next > Total shareholders' equity Total liabilities and shareholders' equity 24,620 $49, 720 23,900 $42,240 22,960 $28,340 Required: 1. Compute the following ratios for the past two years. (Do not round Intermediate calculations. Round the final an places.) Year 8 Yoar 7 9,56% % 9.99% % % % 21.88% 23.21% Ratio Profitability ratios: 1. Return on equity 2. Return on assets Financial leverage 3. Gross profit percentage 4. Net profit margin Asset turnover ratios: 5. Fixed asset turnover 6. Receivables tumover 7 Inventory turnover Liquidity ration: 8. Current ratio 3.63% 4.18% 3.04 2.93 6.64 8.27 3.74 4.97 1.14 1.07
