The condensed financial statements of Westward Corporation for 2009 and 2008 are
ID: 2379764 • Letter: T
Question
The condensed financial statements of Westward Corporation for 2009 and 2008 are presented below.
Westward Corporation Westward Corporation
Balance Sheet Income Statement
December 31, 2009 For the Year Ended December 31, 2009
Assets Revenues $2,000,000
Current assets Expenses
Cash and temporary Cost of goods sold 1,080,000
investments $ 30,000 Selling and administrative
Accounts receivable 70,000 expenses 495,000
Inventories 120,000 Interest expense 30,000
Total current assets 220,000 Total expenses 1,605,000
Property, plant, and Income before income taxes 395,000
equipment (net) 780,000 Income tax expense 140,000
Total assets $1,000,000 Net income $ 255,000
Liabilities and Stockholders' Equity
Current liabilities $ 80,000
Long-term liabilities 300,000
Common stockholders' equity 620,000
Total liabilities and
stockholders' equity $1,000,000
Westward Corporation Westward Corporation
Balance Sheet Income Statement
December 31, 2008 For the Year Ended December 31, 2008
Assets Revenues $2,500,000
Current assets Expenses
Cash and temporary Cost of goods sold 1,750,000
investments $ 40,000 Selling and administrative
Accounts receivable 90,000 expenses 500,000
Inventories 150,000 Interest expense 30,000
Total current assets 280,000 Total expenses 2,280,000
Property, plant, and Income before income taxes 220,000
equipment (net) 800,000 Income tax expense 77,000
Total assets $1,080,000 Net income $ 143,000
Liabilities and Stockholders' Equity
Current liabilities $ 140,000
Long-term liabilities 320,000
Common stockholders' equity 620,000
Total liabilities and
stockholders' equity $1,080,000
Select data from fiscal year 2007:
Inventory: $100,000
Total assets: $900,000
Stockholders
Explanation / Answer
Ratio Analysis : (a) Current Ratio = Current Assets / Current Liabilities = 220,000 / 80,000 = 2.75 (b) Debt to Assets Ratio = Total Liabilities / Total Assets = 380,000 / 1,000,000 = 0.38 (c ) Times Interest Earned = EBIT / Total Interest Payable = (140,000 + 30,000 ) / 30,000 = 5.67 (d) Inventory Turnover : Cost of Goods Sold / Average Inventory :1,080,000 / 110,000=9.81 (e ) Profit Margin Ratio : Net Income / Revenue = 255,000 / 2,000,000 = 0.1275 ( f ) Return on Common Stock Holders' Equity : Net Income / Stock Holders' Equity : 255,000 / 1,000,000 =0.255 (g ) Return on Assets : Net Income + Interest Expense / Total Assets : 255,000 + 30,000 / 1,000,000 =0.28
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