Compute the various ratios for each company

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Reference no: EM131527298

Assignment

Answer each of the questions in the following unrelated situations.

(a) The current ratio of a company is 6:1 and its acid-test ratio is 1:1. If the inventories and prepaid items amount to $494,800, what is the amount of current liabilities?

(b) A company had an average inventory last year of $159,000 and its inventory turnover was 6. If sales volume and unit cost remain the same this year as last and inventory turnover is 8 this year, what will average inventory have to be during the current year? (Round answer to 0 decimal places, e.g. 125.)

(c) A company has current assets of $89,370 (of which $36,250 is inventory and prepaid items) and current liabilities of $36,250. What is the current ratio? What is the acid-test ratio? If the company borrows $10,270 cash from a bank on a 120-day loan, what will its current ratio be? What will the acid-test ratio be? (Round answers to 2 decimal places, e.g. 2.50.)

(d) A company has current assets of $583,200 and current liabilities of $235,100. The board of directors declares a cash dividend of $173,600. What is the current ratio after the declaration but before payment? What is the current ratio after the payment of the dividend? (Round answers to 2 decimal places, e.g. 2.50.)

Current ratio after the declaration but before payment

Current ratio after the payment of the dividend

Heartland Company's budgeted sales and budgeted cost of goods sold for the coming year are $142,310,000 and $97,650,000, respectively. Short-term interest rates are expected to average 10%. If Heartland can increase inventory turnover from its present level of 9 times a year to a level of 12 times per year.

Compute its expected cost savings for the coming year.

Expected Cost Savings $

The following information pertains to Wamser Company:

Cash	$22,000
Accounts receivable	125,500
Inventory	74,500
Plant assets (net)	384,000
Total assets	$606,000
Accounts payable	$74,500
Accrued taxes and expenses payable	24,500
Long-term debt	49,500
Common stock ($10 par)	165,000
Paid-in capital in excess of par	89,000
Retained earnings	203,500
Total equities	$606,000
Net sales (all on credit)	$801,000
Cost of goods sold	605,000
Net income	80,500

Compute the following: (Round answers to 2 decimal places e.g. 15.25.)

(a) Current ratio
(b) Inventory turnover times
(c) Accounts receivable turnover times
(d) Book value per share

(e) Earnings per share

(f) Debt to assets

(g) Profit margin on sales

(h) Return on common stock equity

Your answer is incorrect. Try again.

The following data is given:

	December 31,
	2015	2014
Cash	$65,500	$51,000
Accounts receivable (net)	89,500	59,000
Inventories	89,500	115,000
Plant assets (net)	383,000	325,000
Accounts payable	55,000	40,000
Salaries and wages payable	10,000	5,000
Bonds payable	70,500	71,000
8% Preferred stock, $40 par	100,000	100,000
Common stock, $10 par	120,000	90,000
Paid-in capital in excess of par	85,000	70,000
Retained earnings	187,000	174,000
Net credit sales	905,000
Cost of goods sold	745,000
Net income	83,000

Compute the following ratios: (Round answers to 2 decimal places e.g. 15.25.)

(a)	Acid-test ratio at 12/31/15	2.40: 1
(b)	Accounts receivable turnover in 2015	12 times
(c)	Inventory turnover in 2015	7 times
(d)	Profit margin on sales in 2015	9 %
(e)	Return on common stock equity in 2015	20.17 %

Book value per share of common stock at 12/31/15

As loan analyst for Utrillo Bank, you have been presented the following information.

	Toulouse Co.		Lautrec Co.
Assets
Cash	$116,300		$311,800
Receivables	220,600		305,700
Inventories	573,900		512,000
Total current assets	910,800		1,129,500
Other assets	500,500		617,600
Total assets	$1,411,300		$1,747,100
Liabilities and Stockholders' Equity
Current liabilities	$303,300		$350,200
Long-term liabilities	403,900		500,500
Capital stock and retained earnings	704,100		896,400
Total liabilities and stockholders' equity	$1,411,300		$1,747,100
Annual sales	$944,400		$1,494,000
Rate of gross profit on sales	30	%	35	%

Each of these companies has requested a loan of $49,190 for 6 months with no collateral offered. Because your bank has reached its quota for loans of this type, only one of these requests is to be granted.

Compute the various ratios for each company. (Round answer to 2 decimal places, e.g. 2.25.)

	Toulouse Co.		Lautrec Co.
Current ratio		: 1		: 1
Acid-test ratio		: 1		: 1
Accounts receivable turnover		times		times
Inventory turnover		times		times
Cash to current liabilities		: 1		: 1

Bradburn Corporation was formed 5 years ago through a public subscription of common stock. Daniel Brown, who owns 15% of the common stock, was one of the organizers of Bradburn and is its current president. The company has been successful, but it currently is experiencing a shortage of funds. On June 10, 2015, Daniel Brown approached the Topeka National Bank, asking for a 24-month extension on two $35,120 notes, which are due on June 30, 2015, and September 30, 2015. Another note of $6,450 is due on March 31, 2016, but he expects no difficulty in paying this note on its due date. Brown explained that Bradburn's cash flow problems are due primarily to the company's desire to finance a $306,700 plant expansion over the next 2 fiscal years through internally generated funds.

The commercial loan officer of Topeka National Bank requested financial reports for the last 2 fiscal years.

BRADBURN CORPORATION BALANCE SHEET MARCH 31
Assets	2015	2014
Cash	$18,700	$13,020
Notes receivable	148,930	133,260
Accounts receivable (net)	132,830	126,510
Inventories (at cost)	105,160	51,630
Plant & equipment (net of depreciation)	1,459,800	1,422,000
Total assets	$1,865,420	$1,746,420
Liabilities and Owners' Equity
Accounts payable	$81,630	$91,500
Notes payable	76,690	63,050
Accrued liabilities	16,718	9,000
Common stock (130,000 shares, $10 par)	1,300,000	1,300,000
Retained earnings^a	390,382	282,870
Total liabilities and stockholders' equity	$1,865,420	$1,746,420
^aCash dividends were paid at the rate of $1 per share in fiscal year 2014 and $2 per share in fiscal year 2015.

BRADBURN CORPORATION INCOME STATEMENT FOR THE FISCAL YEARS ENDED MARCH 31
	2015	2014
Sales revenue	$3,013,400	$2,719,000
Cost of goods sold^a	1,539,400	1,431,400
Gross margin	1,474,000	1,287,600
Operating expenses	861,480	790,300
Income before income taxes	612,520	497,300
Income taxes (40%)	245,008	198,920
Net income	$367,512	$298,380
^aDepreciation charges on the plant and equipment of $110,200 and $112,800 for fiscal years ended March 31, 2014 and 2015, respectively, are included in cost of goods sold.

(a) Compute the following items for Bradburn Corporation. (Round answer to 2 decimal places, e.g. 2.25.)

(1) Current ratio for fiscal years 2014 and 2015.
(2) Acid-test (quick) ratio for fiscal years 2014 and 2015.
(3) Inventory turnover for fiscal year 2015.
(4) Return on assets for fiscal years 2014 and 2015. (Assume total assets were $1,693,000 at 3/31/13.)
(5) Percentage change in sales, cost of goods sold, gross margin, and net income after taxes from fiscal year 2014 to 2015.

Reference no: EM131527298

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