The Answers for Part A

From the Answers of Part A ,

Required Part B

The financial statements of Rose Corporation appear below: Rose Corporation Comparative Balance Sheets December 31, 2018 - 19 Assets Cash Short-term investments Accounts receivable (net) Inventory Property, plant and equipment (net) Total assets 2019 $600.000 600,000 1.200.000 1.800.000 7.800.000 $12.000.000 2018 $ 1.200.000 1.800.000 900.000 2.100.000 9.000.000 $15.000.000 Liabilities and stockholders' equity Accounts payable Short-term notes payable Bonds payable Common stock Retained earnings Total liabilities and stockholders' equity $600.000 1,200,000 2.400.000 4.500.000 3.300.000 $12.000.000 $ 900.000 2.700.000 4.800.000 4.500.000 2.100.000 $15.000.000 Rose Corporation Income Statement For the Year Ended December 31, 2019 $12,000,000 7.500.000 4,500,000 Net sales Cost of goods sold Gross profit Expenses Operating expenses Interest expense Total expenses Income before income taxes Income tax expense Net income $1,260,000 540,000 1.80.000 2,700,000 810.000 $ 1.890.000 Required: (a) Using the financial statements, compute the following ratios for Rose Corporation for 2019. Show all computations. (5 marks) 1. Current ratio. 2. Acid-test ratio. 3. Accounts receivable turnover. 4. Inventory turnover. 5. Profit margin. 6. Return on assets. 7. Assets turnover. 8. Times interest earned. 9. Working capital. 10. Debt to assets ratio. (b) Based on the ratios calculated in (a), discuss briefly the improvement or lack thereof in financial position and operating results from 2018 to 2019 of Rose Corporation. 13 marks) Answer 1. Current ratio. = Current Assets / Current Liabilities = 600,000 + 600,000 + 1,200,000 + 1.800,000)/(600.000 + 1.200.000) = 4200000 / 1800000 = 2.33 2. Acid-test ratio. = Quick Assets = 6600.000+600.000 + 1,200,000 / 1800000 = 2400000/1800000 = 1.33 3. Accounts receivable turnover. = Sales / Avg. Receivables = 12,000,000 / 1.200.000 + 900,000)/2 = 12,000,000 / 1050000 = 11.43 4. Inventory turnover. = Cost of goods sold / Avg.Inventory = 7,500,000 / 1.800.000 + 2,100,000)/2 = 7,500,000 / 1950000 = 3.85 5. Profit margin. = Net Income / Sales = 1,890.000 / 12000000 = 15.75% 6. Return on assets. = Net Income / Avg. Total Assets = 1890000 / (12000000 + 15,000,000)/2 = 1890000 / 13500000 = 14% 7. Assets turnover. = Sales / Total Assets = 12000000 / 12000000 = 100% 8. Times interest earned. = Operating Income / Interest Expense = 14.500.000 - 1,260,000)/540,000 (6) Based on the ratios calculated in (a), discuss briefly the improvement or lack thereof in financial position and operating results from 2018 to 2019 of Rose Corporation