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FIN 200 WEEK 2 CHECKPOINT- FINANCIAL RATIOS (JOHN COMPANY)

FIN 200 WEEK 2 CHECKPOINT- FINANCIAL RATIOS (JOHN COMPANY)
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Solution Guide / Answer Key:

WEEK 2 CHECKPOINT- FINANCIAL RATIOS

 

1.      Using the financial statements for the John Company, calculate the 13 basic ratios found in the chapter.

 

 

Balance Sheet
 December 31, 2008

Assets

Current assets: 

 

Cash...........................................................................................

$ 40,000

Marketable securities...................................................................

30,000

Accounts receivable (net).............................................................

120,000

Inventory.....................................................................................

  180,000

Total current assets...................................................................

$370,000

Investments......................................................................................

40,000

Plant and equipment.........................................................................

450,000

Less: Accumulated depreciation...................................................

(100,000)

Net plant and equipment...........................................................

  350,000

Total assets......................................................................................

$760,000

 

Liabilities and Stockholders’ Equity

Current liabilities:

 

Accounts payable........................................................................

$  90,000

Notes payable.............................................................................

10,000

Accrued taxes.............................................................................

   10,000

Total current liabilities...............................................................

110,000

Long-term liabilities:

 

Bonds payable.............................................................................

  170,000

Total liabilities...........................................................................

280,000

Stockholders’ equity........................................................................

 

Preferred stock, $100 par value...................................................

90,000

Common stock, $1 par value.......................................................

60,000

Capital paid in excess of par........................................................

230,000

Retained earnings.........................................................................

  100,000

Total stockholders’ equity.........................................................

  480,000

Total liabilities and stockholders’ equity............................................

$760,000

 

 

 

 

Income Statement
For the Year Ending December 31, 2008

Sales (on credit)...............................................................................

$2,000,000

Less: Cost of goods sold..............................................................

  1,300,000

Gross profit.....................................................................................

700,000

Less: Selling and administrative expenses......................................

  400,000*

Operating profit (EBIT)....................................................................

300,000

Less: Interest expense..................................................................

     20,000

Earnings before taxes (EBT).............................................................

280,000

Less: Taxes.................................................................................

   112,000

Earnings after taxes (EAT)...............................................................

$ 168,000

*Includes $10,000 in lease payments.

 

 

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