Question
Principles of Business Finance Homework #2 (40 points) This homeworks purpose is to calculate different types of financial ratios for a hypothetical firm based on
Principles of Business Finance Homework #2 (40 points)
This homeworks purpose is to calculate different types of financial ratios for a hypothetical firm
based on its available balance sheet and income statements. Show detailed calculations to get full
credit for each question! When finished, sign the homework document and submit the file to the
Canvas under the last name by the specified deadline in MS Word 2013 file format or higher.
Failure to comply with submission requirements may result in grade reduction!
Kramerica Industries, Inc. Balance Sheets as of December 31, 2020
(thousands of USD)
Assets
Liabilities and Owners Equity
Current assets:
2020
Current liabilities:
2020
Cash
318
Accounts payable
412
Accounts receivable
634
Short-term debt
28
Inventory
198
Deferred revenue
116
Investments
52
Current liabilities (total):
556
Other current assets
18
Long-term debt
274
Current assets (total):
1,220
Other long-term liabilities
2
Fixed assets:
-----
TOTAL LIABILITIES:
830
Plant and equipment
1,586
Owners equity:
-----
Patents & trademarks
49
Common stock
1,100
Other fixed assets
15
Retained Earnings
940
Fixed assets (total):
1,650
TOTAL OWNERS EQUITY:
2,040
TOTAL ASSETS:
2,870
LIABILITIES AND EQUITY:
2,870
Kramerica Industries, Inc. Income Statement as of December 31, 2020
(thousands of USD)
Sales Revenue
1,882
Cost of goods sold (COGS)
1,371
Depreciation
85
Earnings before interest and taxes (EBIT)
426
Interest paid
91
Taxable income
335
Taxes
114
Net Income
221
Dividends paid
181
Addition to retained earnings
40
Dont forget to sign this homework and save the file under appropriate name!
2
Based on figures given in the companys balance sheet and income statement for the year 2020,
calculate financial ratios below and interpret their meaning.
1. Profitability Ratios (12 points):
a.
Profit Margin
=
=
=
%
b.
Return on Equity
=
=
=
%
c.
Return on Assets
=
=
=
%
2. Liquidity Ratios (8 points):
a.
Current Ratio
=
=
=
Dont forget to sign this homework and save the file under appropriate name!
3
b.
Cash Ratio
=
=
=
%
3. Financial Leverage Ratios (8 points):
a.
Total Debt Ratio
=
=
=
%
b.
Times Interest Earned Ratio
=
=
=
4. Turnover Ratios (12 points):
a.
Inventory Turnover Ratio
=
=
=
b.
Day's Sales in Inventory
=
=
=
Dont forget to sign this homework and save the file under appropriate name!
4
c.
Total Asset Turnover Ratio
=
=
=
%
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Finance
Authors: Angelico Groppelli, Ehsan Nikbakht
2nd Edition
0812043731, 978-0812043730
