7-2: Liquidity Ratios 7-3: Asset Management Ratios 7-4: Debt Management Ratios 7

Question

7-2: Liquidity Ratios 7-3: Asset Management Ratios 7-4: Debt Management Ratios 7-5: Profitability Ratios Problem 7-11 Balance Sheet Analysis Complete the balance sheet and sales information in the table that follows for J. White Industries using the following financial data: Total assets turnover: 1.5 Gross profit margin on sales: (Sales-Cost of goods sold)/Sales 24% Total liabilities-to-assets ratio: 55% Quick ratio: 1.00 Days sales outstanding (based on 365-day year): 38 days Inventory turnover ratio: 3.0 Round your answers to the nearest whole dollar. Partial Income Statement Information Sales Cost of goods sold $ Balance Sheet Cash Accounts receivable $ Inventories Fixed assets Total assets Accounts payable Long-term debt Common stock Retained earnings Total liabilities and equity $ 50,000 $ 100,000 $ 400,000 $

Explanation / Answer

Workings

asset turnover ratio =Sales/Total Asset

Sales=400000*1.5=600000

Gross Profit =24%

Cost of Goods sold =600000*(1-24%)/100% =456000

inventory turnover ratio =Cost of goods sold/Inventory

3=456000/Inventory

Inventory=456000/3 =152000

Days sales turnover ratio =365/38

365/38=600000/Account Recevable

Account Recevable =62466

Total liabilities to Asset = 55% =Total liabilities/400000

Total liabilities =400000*55%=220000

Current Liabilities =220000-50000 =170000

Quick ratio =QuickAsset /Current Liablities

1=QuickAsset /170000

QuickAsset =170000

QuickAsset =Cash + Account recevable

170000=Cash +62466

Cash =107534

Partial Income Statement Information Sales 600000 Cost of Goods sold 456000

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