True or False: Assets generally appear on the left side of the balance sheet.

True

False

Plant equipment (net) would generally appear under on the balance sheet.

Suppose that Royval Inc has the following data:

Total assets turnover	1.5
Days sales outstanding	36.5 days
Inventory turnover ratio	4
Fixed assets turnover	4
Current ratio	2
Gross profit margin on sales:	20.00%

Also suppose that Royval Inc has the following balance sheet:

Balance Sheet

Assets	Liabilities
Cash		Current Liabilities
Accounts receivable		Long-term debt	$135,000
Inventories		Common stock
Fixed assets		Retained earnings	$120,000
Total assets	$500,000	Total Liabilities and equity
Sales		Cost of goods sold

According to the video, total assets turnover is equal to . Given the value of total assets turnover, along with the level of total assets given, this means that Royvals sales must be .

According to the video, DSO (days sales outstanding) can be written as . Given the value of DSO, along with the level of sales you already calculated, this means that Royvals recevables must be .

According to the video, the inventory ratio can be written as equal to . Given the value of the inventory ratio, along with the level of sales you already calculated, this means that Royvals inventories must be .

According to the video, the fixed asset turnover ratio can be written as . This means that Royval has fixed assets of .

According to the video, cash can be written as total assets minus fixed assets, inventories, and accounts receivable.

This yields a value of cash of for Royval.

According to the video, the current ratio can be written as . Plugging in the value for current assets and the value of the current ratio yields a value of current liabilities of approximately .

According to the video, the value of total assets is equal to the value of total liabilities and equity.

In the video, total liabilities and equity is equal to . Given the level of total liabilities and equity, as well as retained earnings, current liabilities and the level of long-term debt, solving for Royvals common stock yields .

According to the video, gross profit margin can be written as . Given the gross profit margin and the level of sales you have already calculated, this means that Royval has a cost of goods sold of .

Step 3: Practice: Balance Sheet Analysis

Now its time for you to practice what youve learned.

Suppose that Royval Inc has the following data:

Total assets turnover	1.5
Days sales outstanding	36.5 days
Inventory turnover ratio	4
Fixed assets turnover	4
Current ratio	2
Gross profit margin on sales:	20.00%

Also suppose that Royval Inc has the following balance sheet:

Balance Sheet

Assets	Liabilities
Cash		Current Liabilities
Accounts receivable		Long-term debt	$128,250
Inventories		Common stock
Fixed assets		Retained earnings	$114,000
Total assets	$475,000	Total Liabilities and equity
Sales		Cost of goods sold

Use the formulas you learned about in the previous stage of the problem to answer the following questions.

Given the value of total assets turnover, along with the level of total assets given, this means that Royvals sales must be . Given the value of DSO, along with the level of sales you already calculated, this means that Royvals receivables must be .

Given the value of the inventory ratio, along with the level of sales you already calculated, this means that Royvals inventories must be . Given the value of the fixed assets turnover ratio, as well as the level of sales, this means that Royvals fixed assets must be equal to .

Solving for cash yields a value of cash of for Royval. Given the current ratio of 2 and values of cash, accounts receivable, and inventories, the level of current liabilities must be .

Given the level of retained earnings, current liabilities, and long-term debt, along with the relationship between total assets and total liabilities and equity, this means that Royvals common stock must be .

Given the gross profit margin and the level of sales you have already calculated, this means that Royval has a cost of goods sold of .