What is the net working capital and debt ratio

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Reference no: EM131837176

Module 3 Critical Thinking Assignment

Understanding Financial Statements and Cash Flow (100 Points)

Complete the following problems. You will likely use a spreadsheet for this assignment but you may choose to type up your answers in a Word document. In either case, be sure to show your work.

Problem 3-1: Working with a Balance Sheet

Prepare a balance sheet from the following information. What is the net working capital and debt ratio?

DATA

Cash	75,000
Account receivables	64,050
Accounts payable	34,500
Short-term notes payable	15,750
Inventories	60,000
Gross fixed assets	1,920,000
Other current assets	7,500
Accumulated depreciation	468,000
Long-term debt	300,000
Common stock	735,000
Other assets	22,500
Retained earnings	?

Problem 3-2: Computing Cash Flows

Given the following information, prepare a statement of cash flows.

DATA
Increase in accounts receivable	75
Increase in inventories	90
Operating Income	225
Interest Expense	75
Increase in accounts payable	75
Dividends	45
Increase in common stock	60
Increase in net fixed assets	69
Depreciation Expense	36
Income taxes	51
Beginning cash	60

Problem 3-3: Working with the Statement of Cash Flows

Prepare a statement of cash flows from the following scrambled list of items.

DATA
Increase in inventories		17,500
Operating income		547,500
Dividends		72,500
Increase in accounts payables		107,500
Interest expense		112,500
Increase in common stock		12,500
Depreciation expense		42,500
Increase in accounts receivable		172,500
Increase in long-term debt		132,500
Increase in short-term notes payable		37,500
Increase in gross fixed assets		135,000
Increase in paid in capital		50,000
Income taxes		112,500
Beginning cash		625,000

Problem 3-4: Ratio Analysis

The Balance Sheet and Income Statement for Saudi Manufacturing Corporation are as follows:

DATA
Balance Sheet:
Cash	22,500
Acct/Rec	90,000
Inventories	45,000
Current assets	157,500
Net fixed assets	202,500
Total assets	360,000

Accts/Pay	49,500
Accrued expenses	27,000
Short-term N/P	13,500
Current liabilities	90,000
Long-term debt	90,000
Owner's equity	180,000
Total liabilities and owners' equity	360,000

Income Statement:
Net sales	360,000
COGS	148,500
Gross profit	211,500
Operating expenses	135,000
Net operating income	76,500
Interest expense	16,515
EBT	59,985
Income taxes	23,985
Net income	36,000

Problem 3-5: Market-Value Ratios

Jeddah Industries has a price earnings ratio of 18.69X.

a. If Jeddah's earnings per share are SAR 2.65, what is the price per share of Jeddah's stock?

b. Using the price per share you calculated in part a, determine the price / book ratio if Jeddah's equity-book value is SAR 12.67.

DATA
Price/earnings ratio	18.69X
Earnings per share (SAR)	2.65
Equity book value (SAR)	12.67

Problem 3-6: Computing Ratios

Use the information from the balance sheet and income statement below to calculate the ratios listed below:

DATA

ASSETS
Cash	250,000
Accounts receivable	75,000
Inventory	125,000
Prepaid expenses	25,000
Total current assets	475,000
Gross plant and equipment	1,002,500
Accumulated depreciation	-165,000
Net plant and equipment	837,500
Total assets	1,312,500
DEBT AND EQUITY
Accounts payable	225,000
Accrued liabilities	157,500
Total current debt	382,500
Long-term debt	300,000
Common stock	512,500
Retained earnings	117,500
Total debt and equity	1,312,500

Sales	525,000
Cost of goods sold	-225,000
Gross profit	300,000
Selling, general, and administrative expenses	-72,500
Depreciation expense	-65,000
Operating income	162,500
Interest expense	-20,000
Earnings before taxes	142,500
Taxes	-40,000
Earnings available to common shareholders	102,500

Reference no: EM131837176

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