Company XYZ Balance Sheet Assets Liabilities Cash $10,000 Accounts Payable $17,0
ID: 2699245 • Letter: C
Question
Company XYZ
Balance Sheet
Assets Liabilities
Cash $10,000 Accounts Payable $17,000
Marketable Securities 20,000 Notes Payable 15,000
Accounts Receivable 35,000 Accrued Wages 10,000
Inventory 30,000 Bank Loan 45,000
Net Plant & Equipment $105,000 Total Liabilities $87,000
Owners Equity
Common Stock $75,000
Retained Earnings 38,000
Total Owners Equity $113,000
Total Assets $200,000 Total Liabilities & Owners Equity $200,000
Sales during the year were $500,000.
Net Income for the year was $40,000.
Market Price per share is currently $30.00.
Interest expense for the year was $5,000.
Earnings before taxes were $60,000.
Shares of Common Stock 10,000
Based on the above information calculate and interpret the following ratios:
1) Current Ratio
2) Quick Ratio
3) Days Sales Outstanding
4) Total Asset Turnover
5) Total Debt Ratio
6) Profit Margin
7) ROA
8) ROE
9) Fixed Asset Turnover
10) Price Earnings Ratio
11) Market to Book Value
12) Based on the ratio analysis you just conducted how good of financial shape do think this firm is in? Why?
13) When will a firm%u2019s ROA and ROE be equal to one another?
Explanation / Answer
current ratio = 95000/(87000-45000)= 2.26
quick ratio = (95000-30000)/(87000-45000) = 1.54
days outstanding = receivable/sales)*365 = 35000*365/500000 = 25.55
total asset turnover = revenue/asset = 500000/200000 = 2.5
total debt ratio = debt/asset = 45000/200000 = .225
profit margin = 40000/500000 = .08
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