Pronghorn Corporation was formed 5 years ago through a public subscription of common stock. Daniel Brown, who owns 15% of the common stock, was one of the organizers of Pronghorn and is its current president. The company has been successful, but it currently is experiencing a shortage of funds. On June 10, 2021, Daniel Brown approached the Topeka National Bank, asking for a 24-month extension on two $34,660 notes, which are due on June 30, 2021, and September 30, 2021. Another note of $6,010 is due on March 31, 2022, but he expects no difficulty in paying this note on its due date. Brown explained that Pronghorn's cash flow problems are due primarily to the company's desire to finance a $298,840 plant expansion over the next 2 fiscal years through internally generated funds. The commercial loan officer of Topeka National Bank requested the following financial reports for the last 2 fiscal years. Pronghorn Corporation Balance Sheet March 31 Assets 2021 2020 Cash $18,270 $12,480 Notes receivable 147,920 132,320 Accounts receivable (net) 132,770 124,290 Inventories (at cost) 105,380 49,890 Plant & equipment (net of depreciation) 1,462,720 1,422,440 Total assets $1,867,060 $1,741,420 Liabilities and Owners' Equity Accounts payable $79,230 $90,420 Notes payable 75,330 62,080 Accrued liabilities 14,450 8,010 Common stock (130,000 shares, $10 par) 1,310,960 1,298,480 Retained earningsa 387,090 282,430 Total liabilities and stockholders' equity $1,867,060 $1,741,420 aCash dividends were paid at the rate of $1 per share in fiscal year 2020 and $2 per share in fiscal year 2021. Pronghorn Corporation Income Statement For the Fiscal Years Ended March 31 2021 2020 Sales revenue $2,982,010 $2,714,300 Cost of goods solda 1,536,070 1,429,200 Gross margin 1,445,940 1,285,100 Operating expenses 862,980 780,940 Income before income taxes 582,960 504,160 Income taxes (40%) 233,184 201,664 Net income $349,776 $302,496 Depreciation charges on the plant and equipment of $99,760 and $103,150 for fiscal years ended March 31, 2020 and 2021, respectively, are included in cost of goods sold. (a) Compute the following items for Pronghorn Corporation. (Round answers to 2 decimal places, e.g. 2.25 or 2.25%.) 1. Current ratio for fiscal years 2020 and 2021. 2. Acid-test (quick) ratio for fiscal years 2020 and 2021. 3. Inventory turnover for fiscal year 2021. 4. Return on assets for fiscal years 2020 and 2021. (Assume total assets were $1,679,620 at 3/31/19.) 5. Percentage change in sales, cost of goods sold, gross margin, and net income after taxes from fiscal year 2020 to 2021. 2020 2021 1. Current ratio 2.39 :1 2.6 :1 2. Acid-test (quick) ratio 1.76 :1 1.92 :1 3. Inventory turnover 19.79 times 4. Return on assets 21.27 % 23.91 % 5. Percent Changes Percent Increase Sales revenue 9.86 % Cost of goods sold 7.48 % Gross margin 12.52 % Net income after taxes 15.63 %
