Question
The financial statements of Sun Corporation appear below: Sun Corporation Comparative Balance Sheets December 31, 2017 - 18 Assets 2018 2017 Cash $ 75,000 $
The financial statements of Sun Corporation appear below:
Sun Corporation
Comparative Balance Sheets
December 31, 2017 - 18
Assets 2018 2017
Cash $ 75,000 $ 150,000
Short-term investments 75,000 225,000
Accounts receivable (net) 150,000 112,500
Inventory 225,000 262,500
Property, plant and equipment (net) 975,000 1,125,000
Total assets $1,500,000 $1,875,000
Liabilities and stockholders' equity
Accounts payable $ 75,000 $ 112,500
Short-term notes payable 150,000 337,500
Bonds payable 300,000 600,000
Common stock 562,500 562,500
Retained earnings 412,500 262,500
Total liabilities and stockholders' equity $1,500,000 $1,875,000
Sun Corporation
Income Statement
For the Year Ended December 31, 2018
Net sales $1,500,000
Cost of goods sold 937,500
Gross profit 562,500
Expenses
Operating expenses $157,500
Interest expense 67,500
Total expenses 225,000
Income before income taxes 337,500
Income tax expense 101,250
Net income $ 236,250
Required:
(a) Using the financial statements, compute the following ratios for Sun Corporation for 2018. Show all computations. (4 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) Prepare a vertical analysis of the 2018 income statement data for Sun Corporation.
(2 marks)
(c) Based on the ratios calculated in (a), and the vertical analysis in (b), discuss briefly the improvement or lack thereof in financial position and operating results from 2017 to 2018 of Sun Corporation. (2 marks)
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