Reference no: EM131598944

Assignment

1. Given the profit loss (income statement) and balance sheet for Sam's Sandwich Delivery (Table 4-8), answer the following:

a. Calculate the following ratios: current, quick, accounts receivable turnover, fixed asset turnover.

• Current ratio= current assets / current liabilities

= 28,253 / 10,659
= 2.659

• Quick ratio = current assets-inventory-prepaid expenses /current liability

= 28,253-2,607-0 / 10,659
= 2.47

• Account receivable turnover = net credit sales / average account receivable

= 172,700 / 6843
=25.249

• Fixed assets turnover =net sales /average fixed assets

= 172,700 / 20,351
= 8.499

b. Using the inventory figure on the balance sheet as average inventory, calculate the inventory turnover ratio.

• Inventory turnover ratio = cost of goods sold / average inventory

= 52,067 / 2607
= 19.979

c. Calculate the debt-to-equity ratio, debt-to-total asset ratio, and operating profit margin ratio.

• Debt-to-equity ratio = total liabilities / total equity

= 29,285 / 19,319
= 1.515

• Debt-to-total asset ratio = total liabilities / total assets

= 29,285 / 48,604
=0.603

• Operating profit margin ratio = operating income /net sales

=9,516 / 172,700
= 0.055

d. Perform a vertical analysis of the income statement.

e. Perform a vertical analysis of the balance sheet.

f. Based on your analysis, would you consider investing in Sam's Sandwich Delivery?

Ans: based on my analysis ,I wouldn't consider investing in sam's sandwich delivery because the net profit margin is too low.

Table 4-8 Financial Statements for Sam's Sandwich Delivery
Profit Loss (Income Statement) for Six Months Ending 06-30-2013
Revenues
	Retail Sales		$68,283
	Wholesale Sales		104,417
Total Revenues				$172,700
Cost of Sales			52,067
Gross Profit				$120,633
	Total Operating Expenses		111,117
Operating Profit				$    9,516
Other Income/Expenses
	Interest Income		41
	Interest Expense		(651)
	Depreciation-Store Equipment		(292)
Total Other Income/Expenses				(902)
Net Profit					$   8,614
Balance Sheet as of 06-30-2013
Assets
Current Assets
	Change Fund			$       569
	Cash in Bank-Checking			8,612
	Cash in Bank-Savings			9,622
	Accounts Receivable			6,843
	Inventories			2,607
Total Current Assets					$ 28,253
Fixed Assets
	Furniture and Fixtures		4,296
	Less: Accum Depreciation		4,110	186
	Equipment		68,293
	Less: Accum Depreciation		67,725	568
	Transportation Equipment		31,168
	Less: Accum Depreciation		11,571	19,597
Total Fixed Assets					$ 20,351
Total Assets					$ 48,604
Current Liabilities
	Accounts Payable Trade			6,208
	Accrued Payroll Taxes			3,464
	Accrued Sales Taxes			987
Total Current Liabilities					$ 10,659
Long-Term Liabilities
	Auto Loans Payable			18,626
	Total Long-Term Liabilities				$ 18,626
	Total Liabilities				$ 29,285
Stockholder's Equity
	Common Stock		83,081
	Retained Earnings		(72,376)
	Net Profit/Loss		8,614
Total Equity					19,319
Total Liabilities and Equity					$ 48,604