Skip to main content

Business Finance Intermediate Financial Management

The revenue, costs, profits, and losses incurred by the business organizations over a specific time period are shown while preparing the income statement. An income statement offers useful information about the entities operations, management effectiveness, and underperforming industries, etc. To Prepare: Partial income statement and the Balance sheet Partial Income Statement Sales 600,000 Cost of goods sold 450,000 Balance Sheet Cash 28,000 Accounts payable 110,000 Accounts receivable 60,000 Long-Term debt 50,000 Inventories 120,000 Common stock 140,000 Fixed assets 192,000 Retained earnings 100,000 Total assets 400,000 Total liabilities and equity 400,000 Total assets =$400,000 Total liabilities to assets ratio =40% So,Total liabilities =40%× $400,000 =$160,000 Total assets= Common stock+Retained earnings+ Total liabilities $400,000=Common stock+$100,000+$160,000 Commonstock=$400,000-$100,000-$160,000 =$140,000 Total liabilities =Long term debt+Short term debt $160,000 =$50,000+Short term debt Short term debt =$160,000-50,000 =$110,000 So,Accounts payable (as this is the only short term liability) = $110,000 Total assets turnover ratio =1 .5times So,Turnover =1 .5×Totalassets =1 .5×$400,000 =$600,000 Gross profit margin on sales=25% Grossprofit=Turnover×Gross profit margin on sales =$600,000×25% =$150,000 Cost of goods = Sales - Gross profit =$600,000-$150,000 =$450,000 Days sales outstanding =36 .5days Days sales outstanding = Accounts receivable Total credit sales ×number of days 36 .5= Accountsreceivable $600,000 ×365 Accountsreceivable= 36 .5×$600,000 365 =$60,000 Quick ratio =0 .80 Quick ratio = Quick assets Current liabilities Current liabilities = Accounts payable So,Quick assets=0 .80×$110,000 =$88,000 Quick assets = Cash +Accounts receivable $88,000=Cash+$60,000 Cash=$88,000-$60,000 =$28,000 Inventory turn over ratio = 3 .75 3 .75= cost of goods sold Inventory Inventory= $450,000 3 .75 =$120,000 Fixed assets = Total assets - Accounts receivables - inventory - Cash =$400,000-$60,000-$120,000-$28,000 =$192,000

The revenue, costs, profits, and losses incurred by the business organizations over a specific time period are shown while preparing the income statement. An income statement offers useful information about the entities operations, management effectiveness, and underperforming industries, etc. To Prepare: Partial income statement and the Balance sheet Partial Income Statement Sales 600,000 Cost of goods sold 450,000 Balance Sheet Cash 28,000 Accounts payable 110,000 Accounts receivable 60,000 Long-Term debt 50,000 Inventories 120,000 Common stock 140,000 Fixed assets 192,000 Retained earnings 100,000 Total assets 400,000 Total liabilities and equity 400,000 Total assets =$400,000 Total liabilities to assets ratio =40% So,Total liabilities =40%× $400,000 =$160,000 Total assets= Common stock+Retained earnings+ Total liabilities $400,000=Common stock+$100,000+$160,000 Commonstock=$400,000-$100,000-$160,000 =$140,000 Total liabilities =Long term debt+Short term debt $160,000 =$50,000+Short term debt Short term debt =$160,000-50,000 =$110,000 So,Accounts payable (as this is the only short term liability) = $110,000 Total assets turnover ratio =1 .5times So,Turnover =1 .5×Totalassets =1 .5×$400,000 =$600,000 Gross profit margin on sales=25% Grossprofit=Turnover×Gross profit margin on sales =$600,000×25% =$150,000 Cost of goods = Sales - Gross profit =$600,000-$150,000 =$450,000 Days sales outstanding =36 .5days Days sales outstanding = Accounts receivable Total credit sales ×number of days 36 .5= Accountsreceivable $600,000 ×365 Accountsreceivable= 36 .5×$600,000 365 =$60,000 Quick ratio =0 .80 Quick ratio = Quick assets Current liabilities Current liabilities = Accounts payable So,Quick assets=0 .80×$110,000 =$88,000 Quick assets = Cash +Accounts receivable $88,000=Cash+$60,000 Cash=$88,000-$60,000 =$28,000 Inventory turn over ratio = 3 .75 3 .75= cost of goods sold Inventory Inventory= $450,000 3 .75 =$120,000 Fixed assets = Total assets - Accounts receivables - inventory - Cash =$400,000-$60,000-$120,000-$28,000 =$192,000

Intermediate Financial Management

Intermediate Financial Management

14th Edition

ISBN: 9780357516782

Author: Brigham, Eugene F., Daves, Phillip R.

Publisher: Cengage Learning

See similar textbooks

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

Blurred answer

Chapter 7, Problem 10P

Chapter 7, Problem 12P

Students have asked these similar questions

What is a derivative, and name two types commonly used in hedging?no ai

What is the yield to maturity (YTM) of a bond, and how is it calculated? Hrlp

What is the yield to maturity (YTM) of a bond, and how is it calculated?

Chapter 7 Solutions

Intermediate Financial Management

Ch. 7 - Financial ratio analysis is conducted by managers,...Ch. 7 - Prob. 3Q Ch. 7 - Profit margins and turnover ratios vary from one...Ch. 7 - How might (a) seasonal factors and (b) different...Ch. 7 - Why is it sometimes misleading to compare a...Ch. 7 - Greene Sisters has a DSO of 20 days. The companys...Ch. 7 - Vigo Vacations has $200 million in total assets,...Ch. 7 - Winston Watch’s stock price is $75 per share....Ch. 7 - Reno Revolvere has an EPS of $1.50, a cash flow...Ch. 7 - Needham Pharmaceuticals has a profit margin of 3%...

Ch. 7 - Prob. 6P Ch. 7 - Ace Industries has current assets equal to 3...Ch. 7 - Prob. 10P Ch. 7 - Prob. 11P Ch. 7 - The Kretovich Company had a quick ratio of 1.4, a...Ch. 7 - Data for Lozano Chip Company and its industry...Ch. 7 - Why are ratios useful? What three groups use ratio...Ch. 7 - Prob. 9MC Ch. 7 - What are some qualitative factors that analysts...

Knowledge Booster

Background pattern image

Similar questions

SEE MORE QUESTIONS

Recommended textbooks for you

Managerial Accounting: The Cornerstone of Busines...
Accounting
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Cengage Learning
College Accounting, Chapters 1-27
Accounting
ISBN:9781337794756
Author:HEINTZ, James A.
Publisher:Cengage Learning,
Managerial Accounting
Accounting
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:South-Western College Pub
Principles of Accounting Volume 1
Accounting
ISBN:9781947172685
Author:OpenStax
Publisher:OpenStax College
Survey of Accounting (Accounting I)
Accounting
ISBN:9781305961883
Author:Carl Warren
Publisher:Cengage Learning
College Accounting, Chapters 1-27 (New in Account...
Accounting
ISBN:9781305666160
Author:James A. Heintz, Robert W. Parry
Publisher:Cengage Learning

Text book image

Managerial Accounting: The Cornerstone of Busines...

Accounting

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Cengage Learning

Text book image

College Accounting, Chapters 1-27

Accounting

ISBN:9781337794756

Author:HEINTZ, James A.

Publisher:Cengage Learning,

Text book image

Managerial Accounting

Accounting

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:South-Western College Pub

Text book image

Principles of Accounting Volume 1

Accounting

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax College

Text book image

Survey of Accounting (Accounting I)

Accounting

ISBN:9781305961883

Author:Carl Warren

Publisher:Cengage Learning

Text book image

College Accounting, Chapters 1-27 (New in Account...

Accounting

ISBN:9781305666160

Author:James A. Heintz, Robert W. Parry

Publisher:Cengage Learning

SEE MORE TEXTBOOKS