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Compute each of the ratios for 2013 and 2014

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Reference no: EM13828819

Comprehensive Problem

Use the following information to answer the questions below: note: all sales are credit sales

Income Stmt info: 2013 2014
Sales   $        1,050,000  $        1,128,750
less Cost of Goods Sold:                325,000                346,125
Gross Profit                725,000                782,625
Operating Expenses                575,000                609,500
Earnings before Interest  & Taxes                150,000                173,125
Interest exp                  25,000                  29,000
earnings before Taxes                125,000                144,125
Taxes                  50,000                  57,650
Net Income  $              75,000  $              86,475



Balance Sheet info: 12/31/2013 12/31/2014
Cash                  60,000  $              66,000
Accounts Receivable                  80,000  $              83,200
Inventory                110,000  $            119,900
Total Current Assets  $            250,000  $            269,100
Fixed Assets (Net)  $            300,000  $            318,000
Total Assets  $            550,000  $            587,100



Current Liabilities  $            130,000  $            136,500
Long Term Liabilities  $            150,000  $            170,000
Total Liabilities  $            280,000  $            306,500
Stockholder's Equity  $            270,000  $            280,600
Total Liab & Equity:  $            550,000  $            587,100

Compute each of the following ratios for 2013 and 2014 and indicate whether each ratio was getting "better" or "worse" from 2013 to 2014 and whether the 2014 ratio was "good" or "bad" compared to the Industry Avg (round all numbers to 2 digits past the decimal place)


 2013 2014 Getting Better or Getting Worse? 2014 Industry Avg  "Good" or "Bad" compared to Industry Avg
Profit Margin


0.11
Current Ratio


1.90
Quick Ratio


1.12
Return on Assets


0.26
Debt to Assets


0.55
Receivables turnover


18.00
Avg. collection period*


21.20
Inventory Turnover**


8.25
Return on Equity


0.25
Times Interest Earned


8.15

*Assume a 360 day year

**Inventory Turnover can be computed 2 different ways. Use the formula listed in the text (the one the text indicates many credit reporting agencies generally use)

Reference no: EM13828819

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