Question
The Ferri Furniture Company: Balance Sheet as of December 31, 2016 (In Thousands) Cash $ 277,000 Accounts Payable $ 169,000 Receivables 220,000 Notes Payable 74,000
The Ferri Furniture Company: Balance Sheet as of December 31, 2016 (In Thousands)
Cash $ 277,000 Accounts Payable $ 169,000
Receivables 220,000 Notes Payable 74,000
Inventories 145,000 Other current liabilities 57,000
Total current assets $ 642,000 Total current liabilities $ 300,000
Net fixed assets 305,500 Long-term debt 66,500
Common equity 581,000
Total assets $ 947,500 Total liabilities & equity $ 947,500
The Ferri Furniture Company: Income Statement for Year Ended December 31, 2016 (In Thousands)
Sales $ 3,231,000
Cost of Goods Sold
Material $ 947,000
Labour 598,000
Heat, light and power 90,000
Indirect labour 149,000
Depreciation 54,500 1,838,500
Gross Profit $ 1,392,500
Selling Expenses 115,000
General and Administrative expenses 30,000
Earnings before interest and taxes (EBIT) $ 1,247,500
Interest expense 22,500
Earnings before taxes (EBT) 1,225,000
Corporate taxes (40%) 490,000
Net income $ 735,000
The Ferri Furniture Company: Balance Sheet as of December 31, 2016 (In Thousands)
Cash $ 277,000 Accounts Payable $ 169,000
Receivables 220,000 Notes Payable 74,000
Inventories 145,000 Other current liabilities 57,000
Total current assets $ 642,000 Total current liabilities $ 300,000
Net fixed assets 305,500 Long-term debt 66,500
Common equity 581,000
Total assets $ 947,500 Total liabilities & equity $ 947,500
The Ferri Furniture Company: Income Statement for Year Ended December 31, 2016 (In Thousands)
Sales $ 3,231,000
Cost of Goods Sold
Material $ 947,000
Labour 598,000
Heat, light and power 90,000
Indirect labour 149,000
Depreciation 54,500 1,838,500
Gross Profit $ 1,392,500
Selling Expenses 115,000
General and Administrative expenses 30,000
Earnings before interest and taxes (EBIT) $ 1,247,500
Interest expense 22,500
Earnings before taxes (EBT) 1,225,000
Corporate taxes (40%) 490,000
Net income $ 735,000
A Calculate and interpret the financial ratios for 2016 corresponding to the industry norms provided as follows: INDUSTRY NORMS Current ratio 1.5 Inventory turnover 3 Total asset turnover 1 Operating profit margin 18% Operating income return on investment 18% Debt ratio 60% Average collection period 100 days Fixed asset turnover 1.5 Return on equity 15% B Comment on Ferri Companys financial position in terms of liquidity, profitability and solvency as well as its overall performance, by using the ratios that you have found and comparing them with the industry averages.
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