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Liberty
University BUSI 320 Textbook Assignment 1 Comprehensive Problem 1 solutions answers
right
Use the following information to answer the questions
below:
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note: all sales are
credit sales
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Income Stmt info:
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2014
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2015
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Sales
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$
1,050,000
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$
1,181,250
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less Cost of Goods Sold:
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325,000
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346,125
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Gross Profit
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725,000
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835,125
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Operating Expenses
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575,000
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609,500
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Earnings before Interest
& Taxes
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150,000
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225,625
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Interest exp
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25,000
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31,000
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earnings before Taxes
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125,000
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194,625
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Taxes
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50,000
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77,850
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Net Income
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$ 75,000
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$
116,775
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Balance Sheet info:
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12/31/2014
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12/31/2015
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Cash
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60,000
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$ 63,600
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Accounts Receivable
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80,000
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$ 87,200
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Inventory
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110,000
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$
122,100
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Total Current Assets
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$
250,000
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$
272,900
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Fixed Assets (Net)
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$
300,000
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$
312,000
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Total Assets
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$ 550,000
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$ 584,900
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Current Liabilities
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$
130,000
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$
149,500
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Long Term Liabilities
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$
150,000
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$
170,000
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Total Liabilities
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$
280,000
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$
319,500
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Stockholder's Equity
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$
270,000
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$
265,400
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Total Liab & Equity:
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$ 550,000
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$ 584,900
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Compute each of the
following ratios for 2014 and 2015 and
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indicate whether each ratio was getting "better" or
"worse" from 2014 to 2015
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and whether the 2015 ratio was
"good" or "bad" compared to the Industry Avg.
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(round all numbers to 2 digits past the
decimal place)
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2014
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2015
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Getting Better or Getting Worse?
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2015 Industry Avg
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"Good" or "Bad" compared to Industry Avg
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Profit Margin
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0.09
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Current Ratio
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1.80
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Quick Ratio
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1.12
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Return on Assets
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.18
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Debt to Assets
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.49
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Receivables turnover
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12.00
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Avg. collection period*
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22.10
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Inventory Turnover**
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8.25
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Return on Equity
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0.35
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Times Interest Earned
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8.15
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*Assume a 360 day year
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**Inventory Turnover can
be computed 2 different ways. Use the
formula listed in the text
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(the one the text indicates many credit
reporting agencies generally use)
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