Module Four Homework Assignment Exhibit A James Trading Corporation Balance Shee
ID: 1150322 • Letter: M
Question
Module Four Homework Assignment
Exhibit A
James Trading Corporation
Balance Sheet
December 31, 20XX
Assets
$
Liabilities and Equity
$
Cash
23,015
Accounts receivable
141,258
Accounts payable
184,372
Inventory
212,444
Long term debt
168,022
Total current assets
376,717
Total liabilities
352,394
Net Plant and equipment
711,256
Common Stock
313,299
Other assets
89,879
Retained earnings
512,159
Total equity
825,458
Total Assets
$1,177,852
Total Liabilities and Equity
$1,177,852
James Trading Corporation
Income Statement
December 31, 20XX
Income Statement
$
Sales
$2,130,000
Cost of goods sold
(1,015,000)
Gross margin
1,115,000
Operating expenses
(878,000)
Depreciation
(16,030)
Operating income
220,970
Interest expense
(10,011)
Earnings before taxes
210,959
Income taxes
(54,000)
Net income
$156,959
Industry Average Ratios
Item
Ration
Current ratio
2.1
Quick ratio
0.8
Days in inventory
92
Days in accounts receivable
63
Gross margin
23.9%
Net margin
12.3%
Long term debt to equity ratio
1.0
Interest coverage
5.6
ROA
5.3%
ROE
18.8%
1. Using the Exhibit A document, compute the following ratio, compare it to the industry average, and comment. Compute the current ratio.
2. Using the Exhibit A document, compute the following ratio, compare it to the industry average, and comment. Compute the quick ratio.
3. Using the Exhibit A document, compute the following ratio, compare it to the industry average, and comment. Compute days outstanding in accounts receivable.
4. Using the Exhibit A document, compute the following ratio, compare it to the industry average, and comment. Compute the gross margin.
5. Using the Exhibit A document, compute the following ratio, compare it to the industry average, and comment. Compute the net income percentage.
6. Using the Exhibit A document, compute the following ratio, compare it to the industry average, and comment. Compute the long term debt to equity ratio.
7. Using the Exhibit A document, compute the following ratio, compare it to the industry average, and comment. Compute the interest coverage.
8. Using the Exhibit A document, compute the following ratio, compare it to the industry average, and comment. Compute the ROA.
9. Using the Exhibit A document, compute the following ratio, compare it to the industry average, and comment. Compute the ROE.
10. Using the Exhibit A document, compute the following ratio, compare it to the industry average, and comment. Compute the ROE using the DuPont Model.
Assets
$
Liabilities and Equity
$
Cash
23,015
Accounts receivable
141,258
Accounts payable
184,372
Inventory
212,444
Long term debt
168,022
Total current assets
376,717
Total liabilities
352,394
Net Plant and equipment
711,256
Common Stock
313,299
Other assets
89,879
Retained earnings
512,159
Total equity
825,458
Total Assets
$1,177,852
Total Liabilities and Equity
$1,177,852
Explanation / Answer
Question 1
Current Assets = Cash + Accounts receivable + Inventory
Current Assets = $23,015 + $141,258 + $212,444
Current Assets = $376,717
Current Liabilities = Accounts payable = $184,372
Calculate the Current Ratio -
Current Ratio = Current Assets/Current Liabilities = $376,717/$184,372 = 2.04
The current ratio of James Trading Corporation is 2.04
The current ratio of Industry is 2.1
It can be seen that current ratio of James Trading Corporation is lower than the industry average.
This means while average firm in industry held $2.1 of current assets against the $1 of current liabilities, James Trading Corporation holds $2.04 of current assets against the $1 of current liabilities.
Thus, James Trading Corporation is less financially healthier than the average firm in the industry with respect to current ratio.
Question 2
Quick Assets = Cash + Accounts receivable
Current Assets = $23,015 + $141,258
Current Assets = $164,273
Current Liabilities = Accounts payable = $184,372
Calculate the Quick Ratio -
Quick Ratio = Quick Assets/Current Liabilities = $164,273/$184,372 = 0.89
The quick ratio of James Trading Corporation is 0.89
The quick ratio of Industry is 0.80
It can be seen that quick ratio of James Trading Corporation is higher than the industry average.
This means while average firm in industry held $0.80 of quick assets against the $1 of current liabilities, James Trading Corporation holds $0.89 of quick assets against the $1 of current liabilities.
Thus, James Trading Corporation is more financially healthier than the average firm in the industry with respect to quick ratio.
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.