Reference no: EM132904217

Problem - Financial Statements and Ratios - Bike-With-Us Corporation, a specialty bicycle parts replacement venture, was started last year by two former professional cyclists who had substantial competitive racing experience, including the Tour de France. The two entrepreneurs borrowed $50,000 from members of their families, and each put up $30,000 in equity capital. Retail space was rented, and $60,000 was spent for fixtures and store equipment. Following is the abbreviated income statement and balance sheet information for the Bike-With-Us Corporation after one year of operation.

BIKE-WITH-US CORPORATION

Sales $325,000

Operating costs 285,000

Depreciation 10,000

Interest 5,000

Taxes 6,000

Cash $1,000

Receivables 30,000

Inventories 50,000

Fixed assets, net 50,000

Payables 11,000

Accruals 10,000

Long-term loan 50,000

Stockholders' equity 60,000

Required -

A. Prepare an income statement and a balance sheet for the Bike-With-Us Corporation using only the information provided above.

B. Calculate the current ratio, quick ratio, and NWC-to-total-assets ratio.

C. Calculate the total-debt-to-total-assets ratio, debt-to-equity ratio, and interest coverage.

D. Calculate the net profit margin, sales-to-total-assets ratio, and the return on assets.

E. Calculate the equity multiplier. Combine this calculation with the calculations in Part D to show the ROE model with its three components.