The 2020 financial statements of Outdoor Waterworks Inc. follow: Outdoor Waterworks Inc. Income Statement For Year Ended December 31, 2020 Net sales............. $966,000 Cost of goods sold: Inventory, Dec 31, 2019......... $ 75,360 Purchases........ 600.840 Goods available for sale......... $676,200 Inventory, Dec. 31, 2020......... 59,040 Cost of goods sold............ 617,160 Gross profit from sales............ $348.840 Operating expenses.. ... 273,360 Operating profit...................... HALUATION $ 75,480 Interest expen 11,400 Profit before taxes... $ 64,080 Income taxes......... 18.864 Profit......... $ 45,216 Outdoor Waterworks Inc. Balance Sheet December 31, 2020 Assets Cash... $ 22,200 Current non-strategic investments..... 24.450 Accounts receivable, net........ 52,050 Notes receivable.... 10,560 Inventory....... 59,040 Prepaid expenses... 5,760 Plant and equipment, net........ 326.520 Total assets... S500.640 Liabilities and Equity Accounts payable............................. $ 48,840 Accrued wages payable. 6.240 Income taxes payable... 6,960 Long-term note payable, secured by mortgage on plant........... 114.000 Common shares, 160,000 shares....... 192,000 Retained earnings..... 132.600 Total liabilities and equity......... $500.540 Assume the following: - All sales were on credit The long-term note payable is due in 2023, which no current portion. On December 31, 2019, balance sheet, the assets totalled $432,720, common shares were $192,000, and retained earnings were $107,640. Required (please answer the questions in the sheets attached): 1. Calculate the following (44 points): a. Current ratio b. Quick ratio c. Days' sales uncollected d. Inventory turnover e. Days' sales in inventory f. Ratio of pledged plant assets to secured liabilities g. Times interest earned h. Profit margin i. Total asset turnover j. Return on total assets k. Returns on common shareholders' equity .NO 2. Identify whether the ratios calculated above compare favourably or unfavourably to the industry averages (Refer to the industry exhibit below). Make sure you comment on all of the ratios (26 points) Exhibit: 2020 Playground Equipment Industry Average Ratios Current ratio.. 1.6:1 Times interest earned.... 50 times Quick ratio. 11:1 Profit margin.. Accounts receivable turnover........ 16 times Gross profit ratio... Days' sales uncollected.... 21 days Return on total assets... Inventory turnover... 5 times Return on common shareholders' equity... Days' sales in inventory......... .... 70 days Rook value per common share.................. Total asset turnover 2.3 times Rook value per preferred share..................... Accounts payable turnover..... 4 times Earnings per share Debt ratio...... 35% Price-earnings per share....... Equity ratio........ 65% Dividend yield. Pledged assets to secured liabilities.............. ..4:1
