Question
The balance sheet and income statement for Johnson and Breakwater is presented below. Balance Sheet (000) Cash $500 Accounts receivable 1,500 Inventories 500 Current assets
The balance sheet and income statement for Johnson and Breakwater is presented below.
Balance Sheet (000) |
|
Cash | $500 |
Accounts receivable | 1,500 |
Inventories | 500 |
Current assets | 2,500 |
Net fixed assets | 5,000 |
Total Assets | 7,500 |
|
|
Accounts payable | 1,200 |
Bank note | 300 |
Total current liabilities | 1,500 |
long-term debt | 4,000 |
Common stock | 300 |
Retained earnings | 1,700 |
Total liabilities and owners' equity | $7,500 |
|
|
Income Statement (000) |
|
Net sales | $8,500 |
Cost of goods sold | (3,400) |
Gross profit | 5,100 |
Operating expenses | (2,900) |
Net operating income | 2,200 |
Interest expense | (580) |
Earnings before taxes | 1,620 |
Income tax (34%) | (551) |
Net income | $1,069 |
a. Compute the following ratios: Current ratio, Acid test ratio, Debt ratio, Total asset turnover, Operating profit margin, Return on total investments, Times interest earned, Inventory turnover.
b. All other things equal, compute the dollar amount of sales needed to achieve an 18% return on total assets for the coming year.
c. Given Johnson's inventory turnover ratio, find a way of computing the current level of inventory given this ratio and assuming the current level of inventories is unknown. Set up but do not solve.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started