Question
This weeks module is about financial ratios and your assignment summarizes much of what you should have learned in the module. Please use Excelto answer
This weeks module is about financial ratios and your assignment summarizes much of what you should have learned in the module. Please use Excelto answer the questions.
1. The financial statements and industry norms are shown below for Pamplin, Inc.: (50pts)
a. Compute the financial ratios for Pamplin for 2014 and 2015 to compute each against the industry norms. b. How liquid is the firm? c. Are its managers generating an adequate operating profit on the firms assets? d. How is the firm financing its assets? e. Are its managers generating a good return on equity?
Choose 6 from here to compare | Norms |
Current Ratio | 5.00 |
Acid Test (quick) ratio | 3.00 |
Inventory Turnover | 2.20 |
Average collection period | 90.00 |
Debt Ratio | 0.33 |
Times Interest earned | 7.00 |
Fixed-asset turnover | 1.00 |
Operating profit margin | 20% |
Return on common equity | 9% |
Pamplin Inc., Balance Sheet |
|
|
Assets | 2014 | 2015 |
Cash | $ 200 | $ 150 |
Accounts Receivable | 450 | 425 |
Inventory | 550 | 625 |
Current Assets | $1,200 | $1,200 |
Plant & Equipment | $2,200 | $2,600 |
Less accumulated depreciation | (1,000) | (1,200) |
Net plant & equipment | $1,200 | $1,400 |
Total | 625 |
|
Total Assets | $2,400 | $2,600 |
Liabilities and Owners Equity |
|
|
Accounts payable | $ 200 | $ 150 |
Notes payable (9%) | 0 | 150 |
Current Liabilities | $ 200 | $ 300 |
Bonds (8.33% interest) | 600 | 600 |
Total debt | $ 800 | $ 900 |
Owners equity common stock | $300 | $300 |
Paid-in capital | 600 | 600 |
Retained earnings | 700 | 700 |
Total owners equity | $1,600 | $1,700 |
Total liabilities and owners equity | $2,400 | $2,600 |
Income Statement | 2014 | 2015 |
Sales* | $1,200 | $1,450 |
Cost of goods sold | 700 | 850 |
Gross profit | $ 500 | $ 600 |
Operating (expenses) | (30) | (40) |
Depreciation | 220 250 | 200 240 |
Operating profits | $ 250 | $ 360 |
Interest expense | (50) | (64) |
Net income before taxes | $ 200 | $ 296 |
Taxes (40%) | 80 | 118 |
Net income | $ 120 | $ 178 |
*15% of sales are cash sales, with the remaining 85% being credit sales
Be sure to do both the calculations AND the comments. Confine both calculations and comments to thesixratios for which you are responsible. You can use Text Boxesto show your comments. Please be sure to carefully read Part A, it asks you compare both years to the industry norms.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-text-image.webp)
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-subtext-image.webp)
Step: 3
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-subtext-image.webp)
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started