Shareholders' EquityCommon shares.Contributed SurplusRetained Earnings..Total Shareholders' Equity .15,00055,00025,00095,00015,00061,75010,00086,750Total Liabilities and Shareholders' Equity225,000210,000All of Outland's sales are on credit. The company gives customers 60 days to payaccounts receivable. Industry average days to sell inventory is 50 days. Competitorsto Outland typically generate a 6% return on their assets.Outland had the following ratio results in 2019:Gross Profit Margin - 39%Days to Collect Accounts Receivable - 78 daysCurrent Ratio - 1.44Days to Sell Inventory - 107 daysQuick Ratio - 0.89Return on Assets - 7.1%Instructions1) Comment on the 2020 financial performance of Outland Corp. using ratios interms ofa) Liquidityb) Activityc) ProfitabilityHint: You should calculate 2020 ratios for those that Outland calculated in 2019,and then interpret them.2) Would you invest in this company? Why or why not? The following are the comparative financial statements for Outland Corporation for2020 and 2019:OUTLAND CORPORATIONStatement of IncomeFor Periods Ending October 31Sales RevenueCost of Goods SoldGross Profit..2020167,500100,00067,5002019140,00085,00055,000ExpensesDepreciationSelling and AdministrativeInterest Expense.Total Expenses.15,00022,50015,00015,00047,50035,000Net Income (before taxes).Income Taxes25,00010,00015,00022,5007,50015,000Net IncomeOUTLAND CORPORATIONStatement of Financial PositionAs at October 3120202019AssetsCurrent Assets:4,00010,00035,00031,00080,000Cash.2,5007,50030,00025,00065,000Marketable Securities.Accounts Receivable.InventoryTotal Current AssetsInvestments (at cost)..30,00032,500Property, plant and equipmentProperty, Plant and Equipment..Less: Accumulated Depreciation.200,00087,500112,5002,500225,000190,00080,000110,0002,500210,000GoodwillTotal AssetsLiabilities and Shareholders' EquityCurrent Liabilities:Accounts PayableNotes Payable.12,50025,00020,00057,50010,00020,00015,00045,000Accrued and Other LiabilitiesTotal Current Liabilities.Non-current Liabilities:Bonds and Notes Payable.Total Liabilities72,500130,00078,250123,250Shareholders' EquityCommon shares.Contributed SurplusRetained Earnings..15,00055,00025,00015,00061,75010,000

1.Comment on the 2020 financial performance of Outland corp using ratios in terms of (a) Liquidity…

Answered: Gross Profit Margin - 39% Days to…

Gross Profit Margin - 39% Days to Collect Accounts Receivable - 78 days Current Ratio - 1.44 Days to Sell Inventory - 107 days Quick Ratio - 0.89 Return on Assets - 7.1%

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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