The Howit Department store is located in midtown Metro. During the past several years, net income has been declining because of suburban shopping centers. At the close of the year ended December 31,2017, the following accounts appeared in two of its trial balances. 37310 537 310 ccounts Receivable ation-Delin cumulated ash Delivery B Store F etained E Notes Payable rchase Returns and Allowances 120,00 s Returns and Allowances tilities Ex Analysis reveals the following additional data: I. 2. 3. Salaries expense is 70% selling and 30% administrative. Insurance expense is 50% selling and 50% administrative. A physical inventory was conduced for year ended December 31 2017 and the inventory was 4. Rent expense, utilities expense, and property tax expense are valued at S36,200. administrative expenses. 5. S10,000 of the Notes payable is due for payment next year. 6. The beginning balance of accounts receivable is $10,750. 7. The amount of total assets at the beginning of the year is $198,275 5) Prepare the following ratios and show all support for your computations: a) Current Ratio b) Quick Ratio c) Working Capital d) Accounts Receivable Turnover e) Average Collection Period f) Inventory Turnover g) Days in Inventory h )Debt to Total Assets Ratio i) Gross Profit Ratio j) Profit Margin Ratio k) Return on Assets Ratio 1) Asset Turnover Ratio 6) Based on the ratios computed in 5) above, answer the following questions and use the financial statement ratios to support your answers where Do you feel that the company is able to meet its current and long term obligations as they become due? Comment on the profitability of the company with respect to the various profitability ratios that you computed. Woul ld you lend money to this company for the long term? Comment on the ability of the company to collect its receivables and mange inventory. Industry 2015 2016 to Total Assets (%) nterest Eamed Tumover (sales) Asset Turmover Asser Tumover 20.0 7.21 Collection Peniod Tumover 62.3 69.8 72.1 Industry Average 2014 2015 2016 Liquidity Current Quick 1.13 1.31 1.45 1.34 1.05 0.98 1.15 1.29 Working Capital Leverage Debt to Total Assets (%) Times Interest Earned Activity Inventory Turnover (sales) Fixed Asset Turnover Total Asset Turnover Average Collection Period (days) Accounts Receivable Turnover 12,500.00 13,000.00 13,990.00 15,000.00 51.06% | 49.89% 46.84% 47.99% 6.31 5.12 5.99 6.89 18.20 6.89 4.99 19.52 7.21 5.25 20.03 7.84 5.32 26.52 8.15 5.61 5.78 62.31 20.05 5.37 67.02 18.70 5.15 69.87 18.22 4.99 72.15 19.20 Days in Inventory Profitability Gross Profit Margin (%) Net Profit (%) Return on Total Assets (%) Return on Equity (%) Payout Ratio 24.56% | 1.99% 7.50% 16.79% | 56.00% 25.22% 2.56% 8.20% 17.56% 65.00% 26.87% 3.58% 9.23% 18.03% 71.00% 27.81% 4.60% 9.89% 19.02% 45.00%
