US Republic Corporation balance sheet, December 31, 20X3 ASSETS Cash Accounts receivable Inventory Fixed assets, net...
US Republic Corporation balance sheet, December 31, 20X3
ASSETS
Cash
Accounts receivable Inventory
Fixed assets, net
Total assets
LIABILITIES AND SHAREHOLDERS’ EQUITY
$ 1,000,000 5,000,000 7,000,000 17,000,000
$30,000,000
Notes payable, bank Accounts payable Accrued wages and taxes Long-term debt Preferred stock Common stock Retained earnings
Total liabilities and shareholders’ equity
$ 4,000,000 2,000,000 2,000,000 12,000,000 4,000,000 2,000,000 4,000,000
$30,000,000
$16,000,000 4,000,000 $20,000,000
$16,800,000
-
$ 3,200,000 1,200,000
-
$ 2,000,000 240,000
-
$ 1,760,000 2,600,000
-
$ 4,360,000 360,000
-
$ 4,000,000
INDUSTRY NORMS
225% 110% 6.0× 4.0× 33% 40% 15% 20% 12% 1.0× 5.0×
US Republic Corporation statement of income and retained earnings, year ended December 31, 20X3
Net sales Credit
Cash Total
Cost and Expenses
Cost of goods sold
Selling, general, and administrative expenses Depreciation
Interest
Net income before taxes Taxes on income
Net income after taxes
Less: Dividends on preferred stock
Net income available to common shareholders Add: Retained earnings at 1/1/X3
Subtotal
Less: Dividends paid on common stock
Retained earnings 12/31/X3
a. Fill in the 20X3 column in the table that follows.
US Republic Corporation
RATIO 20X1
$12,000,000 2,200,000 1,400,000 1,200,000
20X2
200% 90% 4.5× 3.0× 40% 41% 15% 20% 12% 0.8× 4.5×
20X3
1. Current ratio
2. Acid-test ratio
3. Receivable turnover
4. Inventory turnover
5. Long-term debt/total capitalization 6. Gross profit margin
7. Net profit margin
8. Return on equity
9. Return on investment
10. Total asset turnover 11. Interest coverage ratio
250% 100% 5.0× 4.0× 35% 39% 17% 15% 15% 0.9× 5.5×
164
-
Evaluate the position of the company using information from the table. Cite specific ratio levels and trends as evidence.
-
Indicate which ratios would be of most interest to you and what your decision would be in each of the following situations:
-
(i) US Republic wants to buy $500,000 worth of merchandise inventory from you,
with payment due in 90 days.
-
(ii) US Republic wants you, a large insurance company, to pay off its note at the bank
-
and assume it on a 10-year maturity basis at a current rate of 14 percent.
6 Financial Statement Analysis (iii) There are 100,000 shares outstanding, and the stock is selling for $80 a share. The
company offers you 50,000 additional shares at this price.
Homework Answers
1) In this case US republic becomes my customer, I would be looking more closely at their payable days ratio to check if meets with the industry norms.
The other important factor is their profitability, if they are not making profits they wont be able to pay.
Their debt/equity ratio can be considered to see how much are they spending in interest expenses.
2) I would be looking at the interest coverage ratio to check whether they have the capacity to bear the interest cost, in this case the company does have the capability to pay it off.
3) In this case I would be looking at Gross profit margin, Net profit margin, Return on equity, Return on investment, Total asset turnover and the Earnings per share ratios to get an understanding on the profit performance of the company.
Add Answer to:
US Republic Corporation balance sheet, December 31, 20X3
ASSETS
Cash
Accounts receivable Inventory
Fixed assets, net...
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