Given the financial statements for Jones Corporation and Smith Corporation: JONE
ID: 2768742 • Letter: G
Question
Given the financial statements for Jones Corporation and Smith Corporation:
JONES CORPORATION
Current Assets
Liabilities
Cash
$
20,000
Accounts payable
$
100,000
Accounts receivable
80,000
Bonds payable (long term)
80,000
Inventory
50,000
Long-Term Assets
Stockholders' Equity
Gross fixed assets
$
500,000
Common stock
$
150,000
Less: Accumulated depreciation
150,000
Paid-in capital
70,000
Net fixed assets*
350,000
Retained earnings
100,000
Total assets
$
500,000
Total liabilities and equity
$
500,000
Sales (on credit)
$
1,250,000
Cost of goods sold
750,000
Gross profit
$
500,000
Selling and administrative expense†
257,000
Depreciation expense
50,000
Operating profit
$
193,000
Interest expense
8,000
Earnings before taxes
$
185,000
Tax expense
92,500
Net income
$
92,500
*Use net fixed assets in computing fixed asset turnover.
†Includes $7,000 in lease payments.
SMITH CORPORATION
Current Assets
Liabilities
Cash
$
35,000
Accounts payable
$
75,000
Marketable securities
7,500
Bonds payable (long term)
210,000
Accounts receivable
70,000
Inventory
75,000
Long-Term Assets
Stockholders' Equity
Gross fixed assets
$
500,000
Common stock
$
75,000
Less: Accumulated depreciation
250,000
Paid-in capital
30,000
Net fixed assets*
250,000
Retained earnings
47,500
Total assets
$
437,500
Total liabilities and equity
$
437,500
*Use net fixed assets in computing fixed asset turnover.
SMITH CORPORATION
Sales (on credit)
$
1,000,000
Cost of goods sold
600,000
Gross profit
$
400,000
Selling and administrative expense†
224,000
Depreciation expense
50,000
Operating profit
$
126,000
Interest expense
21,000
Earnings before taxes
$
105,000
Tax expense
52,500
Net income
$
52,500
†Includes $7,000 in lease payments.
a.
Compute the following ratios. (Use a 360-day year. Do not round intermediate calculations. Input your profit margin, return on assets, return on equity, and debt to total assets answers as a percent rounded to 2 decimal places. Round all other answers to 2 decimal places.)
Jones Corp.
Smith Corp.
Profit margin
%
%
Return on assets (investments)
%
%
Return on equity
%
%
Receivable turnover
times
times
Average collection period
days
days
Inventory turnover
times
times
Fixed asset turnover
times
times
Total asset turnover
times
times
Current ratio
times
times
Quick ratio
times
times
Debt to total assets
%
%
Times interest earned
times
times
Fixed charge coverage
times
times
Given the financial statements for Jones Corporation and Smith Corporation:
Explanation / Answer
Formula Jones corp Smith Corp Profit Margin Net Income/ Sales 7.40% (92500*100/1250000) 5.25% (52500*100/1000000) Return on assets Net Income/ Avg Total Assets 0.185 (92500/(500000) 0.12 52500/437500 0.7 52500/75000 Return on Equity Net income/ Avg Equity 0.616666667 92500/150000 Receivable Turnover Credit Sales/ Avg Accounts Reci 15.625 1250000/80000 14.28571 1000000/70000
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