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sing Financial Statements for 2020, debt ratio for the year 2020 is 0.33.

sing Financial Statements for 2020, debt ratio for the year 2020 is 0.33.

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
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Question 94

Using Financial Statements for 2020, debt ratio for the year 2020 is 0.33.

### Financial Statements Overview #### Balance Sheet (2020) **Assets:** - Cash: $280,000 - Accounts Receivable: $117,600 - Inventory: $89,600 - Prepaid Expenses: $14,000 Total Current Assets: $501,200 - Fixed Assets: $33,600 **Total Assets: $534,800** **Liabilities & Equity:** _Current Liabilities:_ - Accounts Payable: $90,916 - Notes Payable: $48,132 - Accrued Expenses: $42,784 - Taxes Payable: $37,436 - Deferred Taxes: $48,132 Total Current Liabilities: $267,400 _Long-Term Liabilities:_ - Long-Term Notes: $123,004 **Total Liabilities: $390,404** _Equity:_ - Capital Stock: $53,480 - Retained Earnings: $90,916 **Total Equity: $144,396** **Total Liabilities & Equity: $534,800** --- #### Income Statement (2020) - **Sales:** $530,000 - Cost of Goods Sold: $148,400 **Gross Profit: $381,600** Interest Income: $53,600 **Total Income: $434,600** _Expenses:_ - Sales Salaries: $121,900 - Office Salaries: $26,500 - Office Equipment Rental: $37,100 - Interest Expense: $15,900 - General & Administrative: $4,770 **Total Expenses: $206,170** **Income Before Tax:** $228,430 **Income Taxes:** $132,500 **Net Income:** $95,930 --- ### Explanation of Financial Statements The **Balance Sheet** provides a snapshot of the company's financial position at a specific point in time, showing what the company owns (assets) and what it owes (liabilities and equity). The balance between total assets and total liabilities plus equity indicates the company's financial health. The **Income Statement** shows the company's performance over a period of time, detailing how revenue is transformed into net income. It highlights major categories such as sales, costs, gross profit, operating expenses, and taxes, allowing stakeholders to understand profitability and operational efficiency.
Transcribed Image Text:### Financial Statements Overview #### Balance Sheet (2020) **Assets:** - Cash: $280,000 - Accounts Receivable: $117,600 - Inventory: $89,600 - Prepaid Expenses: $14,000 Total Current Assets: $501,200 - Fixed Assets: $33,600 **Total Assets: $534,800** **Liabilities & Equity:** _Current Liabilities:_ - Accounts Payable: $90,916 - Notes Payable: $48,132 - Accrued Expenses: $42,784 - Taxes Payable: $37,436 - Deferred Taxes: $48,132 Total Current Liabilities: $267,400 _Long-Term Liabilities:_ - Long-Term Notes: $123,004 **Total Liabilities: $390,404** _Equity:_ - Capital Stock: $53,480 - Retained Earnings: $90,916 **Total Equity: $144,396** **Total Liabilities & Equity: $534,800** --- #### Income Statement (2020) - **Sales:** $530,000 - Cost of Goods Sold: $148,400 **Gross Profit: $381,600** Interest Income: $53,600 **Total Income: $434,600** _Expenses:_ - Sales Salaries: $121,900 - Office Salaries: $26,500 - Office Equipment Rental: $37,100 - Interest Expense: $15,900 - General & Administrative: $4,770 **Total Expenses: $206,170** **Income Before Tax:** $228,430 **Income Taxes:** $132,500 **Net Income:** $95,930 --- ### Explanation of Financial Statements The **Balance Sheet** provides a snapshot of the company's financial position at a specific point in time, showing what the company owns (assets) and what it owes (liabilities and equity). The balance between total assets and total liabilities plus equity indicates the company's financial health. The **Income Statement** shows the company's performance over a period of time, detailing how revenue is transformed into net income. It highlights major categories such as sales, costs, gross profit, operating expenses, and taxes, allowing stakeholders to understand profitability and operational efficiency.
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