Tribke Enterprises collected the following data from its financial reports for 2

Question

Tribke Enterprises collected the following data from its financial reports for 2012:
Stock price                                               $18.37
Inventory balance                                    $300,000
Expenses (excluding COGS)                   $1,120,000
Shares outstanding                                  290,000
Average issue price of shares                 $5.00
Gross margin %                                       40%
Interest rate                                              8%
TIE ratio                                                    8
Inventory turnover                                    12 x
Current ratio                                             1.5
Quick ratio                                                .75
Fixed asset turnover                                1.5

Complete the following abbreviated financial statements, and calculate per share ratios indicated. (Hint: Start by subtracting the formula for the quick ratio from that for the current ratio and equating that to the numerical difference.)

Set up an income statement that includes revenue, COGS, GM, EBIT, EBT, and EAT. Set up a balance sheet that includes Current assets, Fixed assets, Total assets, current liabilities, long-term debt, Equity (paid in capital*, and retained earnings), total equity, and total liabilities & equity.

*Paid-in capital = Common Stock + Paid-in Excess

Explanation / Answer

The inventory balance of $300,000 represents the difference between the Current Ratio and the Quick Ratio. Therefore, $300,000/x = .75, where x equals Total Current Liabilities. Total Current Liabilities = $300,000/.75 = $400,000.

Since the Current Ratio is 1.5, x/$400,000 = 1.5, where x equals Total Current Assets. Total Current Assets = 1.5 x $400,000 = $600,000

Inventory Turnover = Cost of Goods Sold/Inventory, so 12 = x/300,000. Therefore, Cost of Goods Sold is $3,600,000.

If the Gross Margin % is 40%, the Cost of Goods Sold must be 60% of Revenues. Therefore, Revenues x 60% = $3,600,000. Revenues = $6,000,000

Gross Margin = $6,000,000 - $3,600,000 = $2,400,000

Gross Margin minus Operating Expenses = EBIT. $2,400,000 - $1,120,000 = $1,280,000 = EBIT.

TIE = EBIT/Interest Expense. 8 = $1,280,000/Interest Expense. Interest Expense = $160,000

Long Term Debt x Interest Rate = Interest Expense. Therefore, Long Term Debt x 8% = $160,000. $160,000/.08 = $2,000,000 = Long Term Debt

Fixed Asset Turnover = Revenues/Fixed Assets. Therefore, 1.5 = $6,000,000/Fixed Assets. Fixed Assets = $6,000,000/1.5 = $4,000,000

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