Condensed statement of financial position and income statement data for Speedway

Question

Condensed statement of financial position and income statement data for Speedway Ltd. are shown below: SPEEDWAY LTD Statement of Financial Position December 31 (in thousands) 2018 2017 2016 Assets Current assets $29 904 1,191 $80 $198 499 502 2,1241,5801,199 4,133 3,7803,1959 $6,257 $5,360 $4,398 Cash Accounts receivable 694 806 Inventory Total current assets Property, plant, and equipment (net) Total assets Liabilities and Shareholders' Equity Liabilities $594$546 $496 3,0982,297 1,499 3,692 2,843 1,99!5 Current liabilities Non-current liabilities Total liabilities Shareholders' equity 1,0101,010 1,010 1,5551,507 1,393 2,565 2,5172,403 Total liabilities and shareholders' equity $6,257 $5,360 $4,398 Common shares Retained earnings Total shareholders' equity

Explanation / Answer

Inventory Turnover Ratio = Cost of goods Sold/Average Inventory Average Inventory = (Opening Inventory+closing Inventory)/2 Current Ratio = Current Assets/Current Liability Gross profit Margin = (Total Sales-Cost of goods sold)/Total sales Profit Margin Ratio = Net income/Net sales Debt to total assets ratio = Total debts/total assets Times interest earned ratio = Income before interest and taxes /Interest Expense 1 (a)Receivables Turnover Ratio 2016 2017 2018 Credit Sales/Average Accounts Receivable 3629/499 4034/596 4512/799 7.3 6.8 5.6 Average Receivable (499+499)/2 = 499 (499+694)/2 = 596 (694+904)/2 = 799 (b)Inventory Turnover Ratio 2016 2017 2018 Cost of goods Sold/Average Inventory 1811/502 2111/654 2506/998 3.6 3.2 2.5 Average Inventory (502+502)/2=502 (502+806)/2=654 (806+1191)/2=998 (c)Current Ratio Current Assets/Current Liability 1199/496 1580/546 2124/594 2.4 2.9 3.6 2 Gross profit Margin (Total Sales-Cost of goods sold)/Total sales 1818/3629 1923/4034 2006/4512 50% 48% 44% 3 Profit Margin Ratio Net income/Net sales 196/3629 249/4034 281/4512 5% 6% 6% 4 (a)Debt to total assets ratio Total debts/total assets 1995/4398 2843/5360 3692/6257 45% 53% 59% (b)Times interest earned ratio 2016 2017 2018 Income before interest and taxes /Interest Expense 331/70 463/131 566/191 4.7 3.5 3.0

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