E5.4 (LO 3) The 2020 and 2019 financial statements of Ken’s Sportswear follow:Balance Sheet20202019Assets Cash$9,000$7,000Accounts receivable12,0009,000Inventory18,00015,000Property, plant, and equipment60,00050,000Total assets$99,000$81,000Liabilities and Shareholders’ Equity Accounts payable$16,500$12,000Notes payable46,00040,000Common stock25,00025,000Retained earnings11,5004,000Total liabilities and equity$99,000$81,000 20202019Income Statement Sales (all on credit)$72,000 Less: Cost of goods sold30,000 Gross profit$42,000 Operating expenses12,000 Net income from operations$30,000 Interest expense5,000 Net income before taxes$25,000 Income tax expense8,500 Net income$16,500 Dividends$9,000 Per-share market price$36$30Outstanding common shares2,0002,000Compute the two performance ratios, leverage (debt/equity and interest coverage only), solvency (current and quick only), asset quality (receivable and inventory turnover only), expense control (return on sales only), performance, and other ratios from Figure 5–3 for 2020.

1 Asset turnover ratio net sales / average total assets. $72000/{(99000+81000)/2} 0.80…

Answered: E5.4 (LO 3) The 2020 and 2019 financial…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Question

E5.4 (LO 3) The 2020 and 2019 financial statements of Ken’s Sportswear follow:

Balance Sheet	2020	2019
Assets
Cash	$9,000	$7,000
Accounts receivable	12,000	9,000
Inventory	18,000	15,000
Property, plant, and equipment	60,000	50,000
Total assets	$99,000	$81,000
Liabilities and Shareholders’ Equity
Accounts payable	$16,500	$12,000
Notes payable	46,000	40,000
Common stock	25,000	25,000
Retained earnings	11,500	4,000
Total liabilities and equity	$99,000	$81,000

	2020	2019
Income Statement
Sales (all on credit)	$72,000
Less: Cost of goods sold	30,000
Gross profit	$42,000
Operating expenses	12,000
Net income from operations	$30,000
Interest expense	5,000
Net income before taxes	$25,000
Income tax expense	8,500
Net income	$16,500
Dividends	$9,000
Per-share market price	$36	$30
Outstanding common shares	2,000	2,000

Compute the two performance ratios, leverage (debt/equity and interest coverage only), solvency (current and quick only), asset quality (receivable and inventory turnover only), expense control (return on sales only), performance, and other ratios from Figure 5–3 for 2020.

Expert Solution

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions