The balance sheet and income statement for Chico Electronics are reproduced below (tax rateis 40%).PROBLEM 1-8Financial StatementRatio AnalysisCHICO ELECTRONICSBalance Sheet ($ thousands)As of December 31Year 4Year 5AssetsCurrent assets$ 683$ 3253,5992,423Cash1,4901,415Accounts receivableInventoriesPrepaid expenses15133,6031,0666,3601,541157Total current assetsProperty, plant and equipment, netOther assets123Total assets$4,792$8,058Liabilities and Shareholders' EquityCurrent liabilities2$$ 875Notes payable to bankCurrent portion of long-term debtAccounts payableEstimated income tax liabilityAccrued expenses ..Customer advance payments3811648593358847257658634963Total current liabilities1,7213,945Long-term debtOther liabilities12217981131Total liabilities1,9244,255Shareholders' equityCommon stock, $1.00 par value; 1,000,000 shares authorized;550,000 and 829,000 outstanding, respectivelyPreferred stock, Series A 10%; $25 par value; 25,000 authorized;20,000 and 18,000 outstanding, respectivelyAdditional paid-in capitalRetained earnings5508295004504505751,3681,949Total shareholders' equity2,8683,803Total liabilities and shareholders' equity$4,792$8,05856Financial Statement AnalysisCHICO ELECTR ONICSIncome Statement ($ thousands)For Years Ending December 31Year 4Year 5Net sales$7,570$12,065Other income, net2613457,83112,4108,048Total revenuesCost of goods sold4,850General, administrative, andmarketing expenseInterest expense1,5312,0252278Total costs and expenses6,40310,151Net income before tax1,4282.259Income tax628994Net income800$ 1.265Required:Compute and interpret the following financial ratios of the company for Year 5:a. Acid-test ratiob. Return on assetsc. Return on common equityd. Earnings per sharee. Gross profit margin ratiof. Times interest earnedg. Days to sell inventoryh. Long-term debt to equity ratioi. Total debt to equityj. Sales to end-of-year working capitalCHECK(d) EPS, $1.77(CFA Adapted)

Acid test Ratio Return on Assets (ROA) Return on common stockholders’ equity (ROE) Earnings per…

Required: Compute and interpret the following financial ratios of the company for Year 5: a. Acid-test ratio b. Return on assets c. Return on common equity d. Earnings per share e. Gross profit margin ratio f. Times interest earned g. Days to sell inventory h. Long-term debt to equity ratio i. Total debt to equity j. Sales to end-of-year working capital

Required: Compute and interpret the following financial ratios of the company for Year 5: a. Acid-test ratio b. Return on assets c. Return on common equity d. Earnings per share e. Gross profit margin ratio f. Times interest earned g. Days to sell inventory h. Long-term debt to equity ratio i. Total debt to equity j. Sales to end-of-year working capital

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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