Comprehensive Problem
BUSI 320 Comprehensive Problem 1 Version FALL D Use the
following information to answer the questions below:
note: all sales are credit sales
Income Stmt info:
2016
2017
Sales
$ 1,050,000
$ 1,207,500
less Cost of Goods Sold:
325,000
357,500
Gross Profit
725,000
850,000
Operating Expenses
575,000
609,500
Earnings before Interest & Taxes
150,000
240,500
Interest exp
25,000
31,000
earnings before Taxes
125,000
209,500
Taxes
50,000
83,800
Net Income
$ 75,000
$ 125,700
Balance Sheet info:
12/31/2016
12/31/2017
Cash
60,000
$ 66,000
Accounts Receivable
80,000
$ 96,000
Inventory
110,000
$ 121,000
Total Current Assets
$ 250,000
$ 283,000
Fixed Assets (Net)
$ 300,000
$ 312,000
Total Assets
$ 550,000
$ 595,000
Current Liabilities
$ 130,000
$ 143,000
Long Term Liabilities
$ 150,000
$ 170,000
Total Liabilities
$ 280,000
$ 313,000
Stockholder’s Equity
$ 270,000
$ 282,000
Total Liab & Equity:
$ 550,000
$ 595,000
Compute each of the following ratios for 2016 and 2017 and
indicate whether each ratio was getting “better” or “worse” from 2016 to 2017
and whether the 2017 ratio was “good” or “bad” compared to the Industry Avg.
(round all numbers to 2 digits past the decimal place)
2016
2017
Getting Better or Getting Worse?
2017 Industry Avg
“Good” or “Bad” compared to Industry Avg
Profit Margin
0.11
Current Ratio
1.80
Quick Ratio
1.12
Return on Assets
.22
Debt to Assets
.50
Receivables turnover
13.00
Avg. collection period*
29.10
Inventory Turnover**
8.25
Return on Equity
0.35
Times Interest Earned
7.15
*Assume a 360 day year
**Inventory Turnover can be computed 2 different ways. Use the formula listed in the text
(the one the text indicates many credit reporting agencies generally use)
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