BALANCE SHEET ANALYSIS following financial data: Complete the balance sheet and

Question

BALANCE SHEET ANALYSIS following financial data: Complete the balance sheet and sales information using the Debt ratio: 50% Current ratio: 1.8x Total assets turnover: 1.5x Days sales outstanding: 36.5 days" Gross profit margin on sales (Sales-Cost of goods sold)/Sales-25% Inventory turnover ratio: 5X Calculation is based on a 365-day year Balance Sheet Cash Accounts receivable Inventories Fixed assets Total assets Sales Accounts payable Long-term debt Common stock Retained earnings 60,000 97,500 300,000 Total liabilities and equity Cost of goods sold

Explanation / Answer

Total Liabilities and equity = Total assets = $3,00,000 Debt ratio = Long term debt / Total Equity = 50% Total Equity = Long term debt / 50% = $60000/50% = $120000 Common stock = Total equity - retained earnings = $120000 - $97500 = $22,500 Accounts Payable = Total liabilities and equity - Total equity - Long term debt = $3,00,000 - $1,20,000 - $60,000 = $1,20,000 Total assets turnover ratio = Sales / Total assets = 1.5 Sales = Total assets * 1.5 = $300000 * 1.5 = $4,50,000 Inventory turnover ratio = Sales / Inventory = 5 Inventory = Sales / 5 = $4,50,000 / 5 = $90,000 Days sales outstanding = Accounts receivables / [Sales / 365 days] = 36.5 days Accounts Receivables = 36.5 days * [$450000/ 365 days] = $45,000 Current ratio = Current assets / Current Liabilities = 1.8 Current assets = 1.8 * Accounts Payable = 1.8 * $1,20,000 = $2,16,000 Cash = Current assets - Inventory - Accounts Receivables = $2,16,000 - $90,000 - $45,000 = $81,000 Cost of goods sold = Sales * (1-Gross margin %) = $4,50,000 * (1-0.25) = $3,37,500 Fixed assets = Total assets - Current assets = $3,00,000 - $2,16,000 = $84,000 Balance Sheet Cash $81,000.00 Accounts Payable $120,000.00 Accounts Receivables $45,000.00 Long term debt $60,000.00 Inventories $90,000.00 Common stock $22,500.00 Fixed assets $84,000.00 Retained Earnings $97,500.00 Total Assets $300,000.00 Total Liabilities and Equity $300,000.00 Sales $450,000.00 Cost of goods sold $337,500.00

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