Sales revenue $5,075,000 Less: Cost of goods sold Gross margin 3,704,000 Less: Operating expenses 1,371,000 Selling expense $650,000 General and administrative expenses 416,000 Amortization Expense 152,000 Total operating expense 1,218,000 Operating Earnings (EBIT) 153,000 Less: Interest expense 93,000 Earnings before taxes 60,000 Less: Taxes (rate = 40%) 24,000 Net income after taxes $36.000 Historical Ratios The Budda-Bing Manufacturing Company Industry Ratio Actual Actual Actual Average 2010 2011 2012 2012 Current ratio 1.7 1.8 1.5 Quick Ratio 1.0 0.9 1.2 Average age of inventory 70.2days 73 days 35.8days Average Collection period 50 days 55 days 46 days Total Asset turnover (times) 1.5 1.5 2.0 Debt ratio 45.8% 54.3% 24.5% Times interest earned ratio 2.2 1.9 2.5 Gross margin 27.5% 28.0% 26.0% Profit margin 1.1% 1.0% 1.2% Return on total assets (ROA) 1.7% 1.5% 2.4% Return on Equity (ROE) 3.1% 3.3% 3.2% ACC-933 Assignment 1 The Budda-Bing Manufacturing Company Page 4 of 6