The condensed financial statements of Marks Company for the years 2014-2015 are
ID: 2331840 • Letter: T
Question
The condensed financial statements of Marks Company for the years 2014-2015 are presented below:
Marks Company Comparative Balance Sheets As of December 31, 2014 and 2015
2015 2014
Cash $367,000 $134,000
Accounts receivable (net) 373,000 308,000
Inventories 379,000 342,000
Plant and equipment 1,850,000 1,116,000
Accumulated depreciation (263,000 ) (192,000 )
$2,706,000 $1,708,000
Accounts payable $342,000 $163,000
Dividends payable -0- 43,000
Bonds payable 400,000 -0-
Common stock ($10 par) 1,523,000 1,220,000
Retained earnings 441,000 282,000
$2,706,000 $1,708,000
Additional data:
Market value of stock at 12/31/15 is $80 per share.
Marks sold 35,000 shares of common stock at par on July 1, 2015.
Marks Company Condensed Income Statement For the Year Ended December 31, 2015
Sales revenue $2,428,000
Cost of goods sold 1,649,000
Gross profit 779,000
Administrative and selling expenses 500,000
Net income $279,000
Compute the following financial ratios by placing the proper amounts for numerators and denominators. (Round per unit answers to 2 decimal places, e.g. 52.75.)
(a) Current ratio at 12/31/15
(b) Acid test ratio at 12/31/15
(c) Accounts receivable turnover in 2015
(d) Inventory turnover in 2015
(e) Profit margin on sales in 2015
(f) Earnings per share in 2015
(g) Return on common stock equity in 2015
(h) Price earnings ratio at 12/31/15
(i) Debt to assets at 12/31/15
(j) Book value per share at 12/31/15
Explanation / Answer
Calculations of ratios Current Ratio = current assets/ currrent laibility current assets = cash +accounts receviable+inventories current assets = cash +accounts receviable+inventories Current Assets = 367000+373000+379000=1119000 current lability / accounts payable = 342000 therefore current ratio = 1119000/342000= 3.27 b) Acid test ratio = current assets - inventories /current laibilities acid test ratio = 1119000-379000= 740000 acid test ratio = 740000/342000 = 2.163 c) Account receviable turnover = sale / avereage accounts receviable account receviable turnover = 2428000/527000 = 4.607 avereage accounts receviable= 373000+308000/2 =527000 D) inventory turnover= cost of goods sold/average inventory average inventory = 379000+342000/2 = 550000 inventory turnover = 1649000/550000 = 2.998 e) profit margin = net income/sale *100 profir margin = 279000/2428000= 11% F) Earning per share (EPS) = NET income/no of share outstanding earning per share (EPS) = 279000/35000=7.97 g) return on common equity = net income /avg equity shareholder avg common share = 1523000+1220000/2= 2133000 return on common equity = 279000/2133000 = 13% h) Price earning ratio = Share price/ EPS prie earning ratio= 80/7.97= 10.03 i) debt / equity = bonds payable/total assets debt / equity = 400000/2706000= 0.147 j) Book value per share = common stock /no of stock outstanding book value per share = 1523000/35000 book value per share= 43.51
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