BETA MANUFACTURING COMPANY, Balance Sheet Cash and Marketable Securities $80,000
ID: 2651609 • Letter: B
Question
BETA MANUFACTURING COMPANY, Balance Sheet
Cash and Marketable Securities $80,000
Accounts Receivable 1,500,000
Inventories (lower of cost or market) 257,800
Prepaid Expenses 20,000
Accumulated Tax Prepayments 15,000
Current Assets 1,872,800
Fixed Assets at Cost 1,245,000
less: Accumulated Depreciation 670,000
Net Fixed Assets 574,500
Investments, Long-Term 233,700
Goodwill 1,000,000
Total Assets $3,681,000
Bank Loans and Notes Payable $90,000
Accounts Payable 25,000
Accrued Taxes 45,000
Other Accrued Liabilities 190,000
Current Liabilities 350,000
Long-Term Debt 900,000
Common Stock, $1 par value 250,500
Paid-in Capital 180,000
Retained Earnings 2,000,500
Total Net Worth 2,431,000
Total Liabilities and Net Worth $3,681,000
BETA MANUFACTURING COMPANY, Income statement
Net Sales $2,800,800
less: Cost of Goods Sold 1,800,000
Gross Profit 1,000,800
Selling, General and Administrative Expense 550,000
Depreciation 111,600
Interest Expense 250,000
Earnings Before Taxes 89,200
Income Taxes 30,300
Earnings After Tax 58,900
Cash Dividends 15,000
Increase in Retained Earnings $43,900
12) According to the statements in Table 6-2, BETA's gross profit margin was ________.
A) 16.3 percent B) 12.0 percent C) 19.8 percent D) 35.7 percent
13) According to the statements in Table 6-2, BETA's debt-to-equity ratio was ________.
A) 1.03 B) 1.32 C) 0.51 D) 0.61
14) According to the statements in Table 6-2, what was BETA's inventory turnover in days (rounded
to the nearest day)? Use a 365-day year. A) 52 days B) 30 days C) 67 days D) 83 days
15) According to the statements in Table 6-2, BETA's return on equity was ________.
A) 2.42 percent B) 7.59 percent C) 2.20 percent D) 4.99 percent
Explanation / Answer
1) GROSS PROFIT MARGIN = GROSS PROFIT / NET SALES X 100
=1000800 / 2800800 X 100
= 35.7%
2) DEBT EQUITY RATIO = TOTAL LIABILITIES / EQUITY
= (CURRENT LIABILITIES + LONG TERM DEBT) / (COMMON STOCK + PAID IN CAPITAL + RETAINED EARNING)
= (350000 + 900000) / (250500+180000+2000500)
= 1250000/ 2431000
=0.51
3) INVENTORY TURNOVER (IN DAYS) = 365 / (COGS/INVENTORY)
= 365 / (1800000 / 257800)
= 52 DAYS
4) RETURN ON EQUITY = EARNING AFTER TAX / EQUITY
= 58900 / 2431000
= 2.42%
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