Compute each of the following ratios for 2016 and 2017 and indicate whether each
ID: 2815126 • Letter: C
Question
Compute each of the following ratios for 2016 and 2017 and indicate whether each ratio was getting "better" or "worse" from 2016 to 2017 and was "good" or "bad" compared to the Industry Avg for 2016. (round all numbers to 2 digits past the decimal place)
Type your answers in the table and submit this document.
Ratios
2016
2017
Enter “Better” or “Worse”
Industry Avg
Enter "Good" or "Bad" compared to Industry Avg
Profit Margin
1
11
21
0.11
31
Current Ratio
2
12
22
1.90
32
Quick Ratio
3
13
23
1.12
33
Return on Assets
4
14
24
.26
34
Debt to Assets
5
15
25
.55
35
Receivables turnover
6
16
26
18.00
36
Avg. collection period*
7
17
27
21.20
37
Inventory Turnover**
8
18
28
8.25
38
Return on Equity
9
19
29
0.25
39
Times Interest Earned
10
20
30
8.15
40
*Assume a 360 day year
**Inventory Turnover can be computed 2 different ways. Use the formula listed in the text
(the one the text indicates many credit reporting agencies generally use)
Use the following information to answer the questions below:
note: all sales are credit sales
Income Stmt info:
2016
2017
Sales
$ 975,000
$ 1,072,500
less Cost of Goods Sold:
325,000
346,125
Gross Profit
650,000
726,375
Operating Expenses
575,000
609,500
Earnings before Interest & Taxes
75,000
116,875
Interest exp
25,000
31,000
earnings before Taxes
50,000
85,875
Taxes
20,000
34,350
Net Income
$ 30,000
$ 51,525
Balance Sheet info:
12/31/2016
12/31/2017
Cash
60,000
$ 63,600
Accounts Receivable
80,000
$ 84,000
Inventory
110,000
$ 126,500
Total Current Assets
$ 250,000
$ 274,100
Fixed Assets (Net)
$ 300,000
$ 312,000
Total Assets
$ 550,000
$ 586,100
Current Liabilities
$ 130,000
$ 149,500
Long Term Liabilities
$ 150,000
$ 170,000
Total Liabilities
$ 280,000
$ 319,500
Stockholder's Equity
$ 270,000
$ 266,600
Total Liab & Equity:
$ 550,000
$ 586,100
Ratios
2016
2017
Enter “Better” or “Worse”
Industry Avg
Enter "Good" or "Bad" compared to Industry Avg
Profit Margin
1
11
21
0.11
31
Current Ratio
2
12
22
1.90
32
Quick Ratio
3
13
23
1.12
33
Return on Assets
4
14
24
.26
34
Debt to Assets
5
15
25
.55
35
Receivables turnover
6
16
26
18.00
36
Avg. collection period*
7
17
27
21.20
37
Inventory Turnover**
8
18
28
8.25
38
Return on Equity
9
19
29
0.25
39
Times Interest Earned
10
20
30
8.15
40
Explanation / Answer
net income
----------------
total sales
0.048
currentassets
------------------
current liabilities
cash +account receivables
----------------------------
current liabilities
0.987
earnings before taxes
----------------------------
total assets
total liabilitoes
---------------------------
total assets
total turnover
----------------------
account receivable
360 days
----------------------
receivable turnover ratio
total turnover
---------------------
average inventory
earnings before interest and tax
---------------------------
interest
net income
----------------------------
equity
ratio formula 2016 2017 better/worse industry ratio good or bad profit marginnet income
----------------
total sales
0.0370.048
better 0.11 bad current ratiocurrentassets
------------------
current liabilities
1.92 1.833 worse 1.90 bad quick ratiocash +account receivables
----------------------------
current liabilities
1.07690.987
worse 1.12 bad return on assetsearnings before taxes
----------------------------
total assets
0.136 0.199 better 0.26 bad debt to assetstotal liabilitoes
---------------------------
total assets
0.5090 0.545 worse 0.55 good receivables turnovertotal turnover
----------------------
account receivable
12.19 12.76 better 18 bad average collectio period360 days
----------------------
receivable turnover ratio
29.53 days 28.21 days better 21.20 days bad inventory turn overtotal turnover
---------------------
average inventory
8.863 9.069 better 8.25 good times interest earnedearnings before interest and tax
---------------------------
interest
3 3.77 better 8.15 bad return on equitynet income
----------------------------
equity
0.11 0.193 better 0.25 badRelated Questions
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