Question
Salza Technology Corporation Annual Income Statements (in $ Thousands) 2012 2013 Net sales $375 $450 Less: Cost of goods sold -225 -270 Gross profit 150
Salza Technology Corporation
Annual Income Statements (in $ Thousands)
| 2012 | 2013 |
Net sales | $375 | $450 |
Less: Cost of goods sold | -225 | -270 |
Gross profit | 150 | 180 |
Less: Operating expenses | -46 | -46 |
Less: Depreciation | -25 | -30 |
Less: Interest | -4 | -4 |
Income before taxes | 75 | 100 |
Less: Income taxes | -20 | -30 |
Net income | $ 55 | $70 |
Cash dividends |
$ 17 |
$ 20 |
Balance Sheets as of December 31 (in $ Thousands)
| 2012 | 2013 |
Cash | $ 39 | $ 16 |
Accounts receivable | 50 | 80 |
Inventories | 151 | 204 |
Total current assets | 240 | 300 |
Gross fixed assets | 200 | 290 |
Less accumulated depreciation | 95 | 125 |
Net fixed assets | 105 | 165 |
Total assets | $345 | $465 |
Accounts payable |
$ 30 |
$ 45 |
Bank loan | 20 | 27 |
Accrued liabilities | 10 | 23 |
Total current liabilities | 60 | 95 |
Long-term debt | 15 | 15 |
Common stock | 85 | 120 |
Retained earnings | 185 | 235 |
Total liabilities and equity | $345 | $465 |
2. [Liquidity and Financial Leverage Ratios] Refer to the Salza Technology Corporation in Problem 1.
A. Using average balance sheet account data, calculate the (a) current ratio, (b) quick ratio, (c) total-debt-to-total-assets ratio, and (d) the interest coverage ratio for 2013.
B. Repeat the ratio calculations requested in Part A separately for 2012 and 2013 using year-end balance sheet account data. What changes, if any, have occurred in terms of liquidity and financial leverage?
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