Below are the comparative balance sheets for 2016 and 2017 as well as the income statement...
Below are the comparative balance sheets for 2016 and 2017 as well as the income statement for 2017 for Dynamite Sales company.
|
2017 |
2016 |
||||
|
Income statement |
|||||
|
Sales revenue |
$845,000 |
||||
|
Cost of goods sold |
520,000 |
||||
|
Gross profit |
325,000 |
||||
|
Operating expenses |
110,000 |
||||
|
Pretax income |
215,000 |
||||
|
Income tax |
47,300 |
||||
|
Net income |
$167,700 |
||||
|
Balance sheet |
|||||
|
Cash |
$7,200 |
$5,620 |
|||
|
Accounts receivable (net) |
39,400 |
36,000 |
|||
|
Merchandise inventory |
14,000 |
18,000 |
|||
|
Prepaid-expenses |
500 |
400 |
|||
|
Fixed assets (net) |
210,000 |
180,000 |
|||
|
$271,100 |
$240,020 |
||||
|
Accounts payable |
$19,000 |
$18,000 |
|||
|
Income taxes payable |
2,000 |
1,000 |
|||
|
Bonds payable |
94,000 |
90,000 |
|||
|
Common stock |
100,000 |
100,000 |
|||
|
Retained earnings |
56,100 |
31,020 |
|||
|
$271,100 |
$240,020 |
||||
*Assume the following. Interest expense is $8,000. The market price of stock on December 31, 2015 is $26.00. The income tax rate is 22%. The average number of shares outstanding over 2015 is 10,000 shares.
Using this information, calculate and show work for each of the following ratios (show as decimals to four places – do not show as percentages):
|
Profit margin |
|
|
Return on assets |
|
|
Return on equity |
|
|
Earnings per share |
|
|
Price/earnings ratio |
|
|
Current ratio |
|
|
Quick ratio |
|
|
Acid test ratio |
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|
Debt-to-equity ratio |
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|
Accounts receivable turnover |
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|
A/R days until received |
Homework Answers
- Profit margin= Net Income/Net Sales=$167700/$845000
=0.1985
- Return on assets=65.62%
Assets in the beginning (2016)=$ 240020
Assets at the end(2017)=$271100
Average assets= (opening assets+closing assets)/2=$511120/2=$ 255560
Return on assets=Net income/average assets=$167700/$255560
=0.6562
- Return on equity=1.68
Return on equity=net income/shareholder’s equity
=$167700/$100000=1.677
- Earnings per share=$16.77 per share
Earnings per share=Net income/outstanding shares at the end
=$167700/10,000 shares=$16.77
- Price/Earnings ratio=1.55
Price/Earnings ratio=Market Price/Earnings per share
=$26/$16.77=1.5504
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Merchandise inventory
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2016
2015
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$
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88,100
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