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(Solved) (Latest ver. Aug 2020) - Liquidity Growth and Income Statements

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1)Construct the Current Assets section of the Balance Sheet from the following:

Sales (Credit)1,250,000
Gross Profit ( 15% of Sales )
Inventory Turnover20x
Current Liabilities225,000
Working Capital -75,000
Average Collection Period27 days

2)Given the following information & ratios , assemble a Balance Sheet

Sales ( all on credit )2,000,000
Cost of Goods Sold1,800,000
Stockholders Equity250,000
Long term debt is 70% of total debt

DSO18 days
Inventory Turnover24x
Debt/Equity2.5x
Current1x

AssetsLiabilities & Stockholders Equity
CashTotal Current Liabilities
A/RLong term Liabilities
Inventory
Total Current AssetsTotal Liabilities

Net Plant & EquipmentTotal Stockholders Equity

Total AssetsTotal Debt & Stockholders Equity

3)Construct the following Balance Sheet from the following:

DSO10 days
Sales4,500,000
Inventory Turnover27x
Cost of Goods Sold90% of Sales
Current Ratio.8X
Long term debt is equal to two thirds of the total debt
Creditors own 60% of the assets. Assets total 2MM

AssetsLiabilities

CashCurrent Debt
A/RLong Term Debt
Inv
Total Debt
Total Current

Fixed Assets

Total AssetsNet Worth

4)Given the following information , please answer the following for the '02 & '03 years.
As a given , assume the company extends 15 day terms on receivables
and the industry median for Profit margin is 2% ; for current ratio is 1.5x

Use ratios to support your answers

(a) If one of the bank covenants requires a maximum Debt/Equity ratio of 2x; were they in
compliance for the '03 year. If so how much more could they borrow.

(b) Comment on the company's performance relative to their collection of receivables

© Did the company meet their stated goal of a return to shareholders of 20%

d) What would the profit in '02 have been in the budget called for a profit margin of 4.5%

e) Comment on the Company's Liquidity position

ABC Company
Income Statement
For the years ended December 31 , 2002 & December 31,2003

31/12/200231/12/2003

Sales5,000,0005,500,000
COGS4,250,0004,675,000
Gross Profit750,000825,000
S & G Exp500,000550,000
Depreciation50,00075,000
EBIT200,000200,000
Interest25,00020,000
EBT175,000180,000
Gain /Loss on sale of Assets0-150,000

Taxes70,00012,000
EAT105,00018,000
Dividends1,0001,000

ABC Company
Balance Sheet

31/12/200231/12/2003

Current Assets:
Cash125,00025,000
A/R225,000675,000
Inventory100,000150,000
Total Current Assets450,000850,000

Net Plant & Equipment500,000450,000

Total Assets950,0001,300,000

Current Liabilities
A/P200,000250,000
Accrued Expenses100,00050,000
Total Current Liabilities300,000300,000

Long term Liabilities325,000558,000

Total Liabilities625,000858,000

Stockholders Equity
Common Stock10,00030,000
Capital in excess of Par65,000145,000
Retained Earnings250,000267,000
Total Stockholders Equity325,000442,000

Total Liabilties & Stockholders Equity950,0001,300,000

 







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