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Consider the following company’s balance sheet and income statement.  For this company, calculate the following: Current ratio. Number of days’ sales in receivables. Sales to total assets

Consider the following company’s balance sheet and income statement.  For this company, calculate the following: Current ratio. Number of days’ sales in receivables. Sales to total assets

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Consider the following company’s balance sheet and income statement. 

For this company, calculate the following:

  1. Current ratio.

  2. Number of days’ sales in receivables.

  3. Sales to total assets.

### Financial Statements #### Balance Sheet **Assets:** - Cash: $4,000 - Accounts Receivable: $52,000 - Inventory: $40,000 **Total Current Assets:** $96,000 - Fixed Assets: $44,000 **Total Assets:** $140,000 --- **Liabilities and Equity:** - Accounts Payable: $30,000 - Notes Payable: $12,000 **Total Current Liabilities:** $42,000 - Long-term Debt: $36,000 - Equity: $62,000 **Total Liabilities and Equity:** $140,000 --- #### Income Statement - Sales (all on credit): $200,000 - Cost of Goods Sold: $130,000 **Gross Margin:** $70,000 - Selling and Administrative Expenses: $20,000 - Depreciation: $8,000 **EBIT (Earnings Before Interest and Taxes):** $42,000 - Interest Expense: $4,800 **Earnings Before Tax:** $37,200 - Taxes: $11,160 **Net Income:** $26,040 --- These financial statements provide a snapshot of the company's financial health. The balance sheet shows assets, liabilities, and equity, ensuring they balance. The income statement illustrates profitability, highlighting the net income after all expenses and taxes.
Transcribed Image Text:### Financial Statements #### Balance Sheet **Assets:** - Cash: $4,000 - Accounts Receivable: $52,000 - Inventory: $40,000 **Total Current Assets:** $96,000 - Fixed Assets: $44,000 **Total Assets:** $140,000 --- **Liabilities and Equity:** - Accounts Payable: $30,000 - Notes Payable: $12,000 **Total Current Liabilities:** $42,000 - Long-term Debt: $36,000 - Equity: $62,000 **Total Liabilities and Equity:** $140,000 --- #### Income Statement - Sales (all on credit): $200,000 - Cost of Goods Sold: $130,000 **Gross Margin:** $70,000 - Selling and Administrative Expenses: $20,000 - Depreciation: $8,000 **EBIT (Earnings Before Interest and Taxes):** $42,000 - Interest Expense: $4,800 **Earnings Before Tax:** $37,200 - Taxes: $11,160 **Net Income:** $26,040 --- These financial statements provide a snapshot of the company's financial health. The balance sheet shows assets, liabilities, and equity, ensuring they balance. The income statement illustrates profitability, highlighting the net income after all expenses and taxes.
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