Case 1 Given the following financial statements historical ratios, and industry averages, calculate Sterling Company's financial ratios for the most recent year. (Assume a 365-day year.) Sterling Company Income Statement for the Year Ended December 31, 2012 Sales revenue $ 10,000,000 7.500,000 2.500.000 Less: Cost of Goods Sold Gross Profits Less: Operating expenses Selling expense 300.000 General and administrative expent 650,000 Lease expense 50.000 Depreciation expense Total operaling expense Operating profits 200.000 1200,000 1300.000 Less Interest expense 200,000 Net profit before taxes 100.000 Less Taxes (rate - 40) 440,000 Net profit after taxes 660,000 Less: Preferred stock dividends 50,000 Eamrings available for common stockholders 610,000 Earmings per share Sterling Company Balance Sheet as of December 31, 2012 Assets Liabilities & Stockholders' Equtiy Cash 200.000 900,000 Accounts payable Notes payable Marketable Securities 50,000 200,000 Accounts receivable 800,000 Accruals 100,000 Inventories 950.000 Total current liabilities 1200,000 Total current assets 2.000.000 Long-term debt (include financial leases) 3.000,000 12.000,000 Gross fixed assets (at cost) Less Accumulated depreciation Total liabilities 4200,000 Preferred stock (25.000 shares. $2 dividend) Common stiock (200.000 shares at $3 par) 3,000.000 1000.000 600.000 5.200,000 Net fixed assets 9,000.000 Oher assets 1000,000 Paid-in capital in excess of par value-common Retained earrings Total stockholders' equity Total assets 12.000,000 1000,000 7,800,000 Total liabilities & stockholders' equity 12.000,000
Case 1 Given the following financial statements historical ratios, and industry averages, calculate Sterling Company's financial ratios for the most recent year. (Assume a 365-day year.) Sterling Company Income Statement for the Year Ended December 31, 2012 Sales revenue $ 10,000,000 7.500,000 2.500.000 Less: Cost of Goods Sold Gross Profits Less: Operating expenses Selling expense 300.000 General and administrative expent 650,000 Lease expense 50.000 Depreciation expense Total operaling expense Operating profits 200.000 1200,000 1300.000 Less Interest expense 200,000 Net profit before taxes 100.000 Less Taxes (rate - 40) 440,000 Net profit after taxes 660,000 Less: Preferred stock dividends 50,000 Eamrings available for common stockholders 610,000 Earmings per share Sterling Company Balance Sheet as of December 31, 2012 Assets Liabilities & Stockholders' Equtiy Cash 200.000 900,000 Accounts payable Notes payable Marketable Securities 50,000 200,000 Accounts receivable 800,000 Accruals 100,000 Inventories 950.000 Total current liabilities 1200,000 Total current assets 2.000.000 Long-term debt (include financial leases) 3.000,000 12.000,000 Gross fixed assets (at cost) Less Accumulated depreciation Total liabilities 4200,000 Preferred stock (25.000 shares. $2 dividend) Common stiock (200.000 shares at $3 par) 3,000.000 1000.000 600.000 5.200,000 Net fixed assets 9,000.000 Oher assets 1000,000 Paid-in capital in excess of par value-common Retained earrings Total stockholders' equity Total assets 12.000,000 1000,000 7,800,000 Total liabilities & stockholders' equity 12.000,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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a. The firm has an 8-year financial lease requiring annual beginning-of-year payments of $50,000. Five years of the lease have yet to run.
b. Annual credit purchases of $6,200,000 were made during the year.
c. The annual principal payment on the long-term debt is $100,000.
d. On December 31, 2012, the firm’s common stock closed at $39.50 per share.
Question:
1. Using vertical analysis, what is the common stock ratio?
2. What is the
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