Question

1 Condensed financial statements for Games Galore are summarized below: 2 3 Balance Sheet 4 Cash 2016 2015 185,000 $ 143,000 5 Accounts Receivable, Net 6 Inventory 7 Prepaid Insurance 80,000 59,000 134,000 104,000 11,900 5,880 Total Current Assets 380,900 341,880 9 Property and Equipment, Net 514,500 407,000 895,400 $ 10 Total Assets 748,880 11 12 Current Liabilities 85,300 $ 96,800 13 Long-term Liabilities 284,000 224,000 14 Total Liabilities 369,300 320,800 15 Contributed Capital 16 Retained Earnings 299,000 299,000 129,080 227,100 Total Stockholders' Equity 17 428,080 526,100 18 Total Liabilities and Stockholders' Equity 895,400 $ 748,880 19 20 Income Statement 21 Net Sales (all on account) $ 3,031,000 22 Cost of Goods Sold 1,949,000 23 Gross Profit 1,082,000 24 Onerating Exnenses 891.400 Sheet1 READY 100%

1. Use ratios to analyze a company's liquidity and solvency.

Answer 1

1	CURRENT RATIO	380900/85300	4.5	to 1
	CURRENT RATIO=CURRENT ASSETS/CURRENT LIABILITIES
	current assets	380,900.00
	current liabilities	85,300.00
2	receivables turnover=net credit sales/average accounts receivable
	net credit sales	3,031,000.00
	average accounts receivable=(opening receivable+closing recivable)/2
		(80000+59000)/2
		69,500.00
	receivables turnover=	3031000/69500
		43.61	times
3	Days to collect=average accounts receivable/(annual sales/365 days)
		69500/(3031000/365)
		69500/8304.11
		8.00	days
4	inventory turnover=cost of goods sold /average inventory
	cost of goods sold	1,949,000.00
	average inventory=(opening inventory+closing inventory)/2
		(104000+134000)/2
		119,000.00
	inventory turnover=	1949000/119000
		16.38	times
5	days sales in inventory=365/inventory turnover ratio
		365/16.38
		22.00	days
6	debt to assets=total debt/total assets
	total debt=total liabilities=369300
	total assets	895,400.00
	debt to asset ratio=	369300/895400
		0.41	to 1
7	times interest earned=income before interest and tax/interest expense
	income before incometax	176,100.00
	add:interest		14,500.00
	income before interest and tax	190,600.00
	interest expense		14,500.00
	times interest earned=	190600/14500
		13.1	times
8	Profit margin ratio	(NET INCOME*100)/saLES
	Net income	129,100.00
	Sales	3,031,000.00
	Profit margin ratio	(129100*100)/3031000
		4.30	%
9	gross profit margin	(Gross profit*100)/Sales
	Gross Profit	1,082,000.00
	gross profit margin	(1082000*100)/3031000
		35.70	%