lulISSerle had the following balance sheet at beginning 2017: Restaurant buildin
ID: 2339968 • Letter: L
Question
lulISSerle had the following balance sheet at beginning 2017: Restaurant building Restaurant equipment, including furniture Food ingredients plus paper goods, etc. Cash 250,000 25,000 5,000 2,000 Owners' Equity Bank Loan 200,000 82,000 RR prepared and served 10,000 meals during 2017 for which it received an average of 30/meal. Its labor, intermediate goods, gas and electricity, rent cost 225,000. Ignore any depreciation for now. The interest rate on its loan is 7.5%. The cash on its balance sheet represents the average balance on its checki account, which pays 0 interest. Rutgers Rotisserie's tax rate is 22%. RR decided to pay out 60% of its after-tax profits as dividends. What are RR's before and after-tax profits for the year? Its ROE? Coverage ratio? Follow the cash and calculate the change in cash between the start and end of the year.Explanation / Answer
1. a)Income Statement of Rotisserie for the year ending 2017-
Hence RR's before and after tax profits are $68,850 and $53,703 respectively.
b) ROE calculation
ROE = Net profit / Owner's equity
Owners equity= 200,000+53,703(net income)-32,222(dividend @60%of Net income)=221,481
So, ROE = 53,703/221,481
= 0.2424(approx)
c) Coverage ratio calculation
Coverage ratio= Earnings before Interest and txaes/ Interest liability
So, Covergae ratio= 75,000/6150(for fig see 1.a above)
= 12..195(approx)
d) Calculation of changes in cash-
As per the answering policy I've answered first 4 questions including sub parts.
Particulars Amount($) Revenue(10000*30) 300,000 Less: Labour, Intermediate goods, gas, electricity, rent charges 225,000 Earnings before Interest and tax 75,000 Less:Interest on Bank loan @7.5% 6,150 Earnings before tax 68,850 Less: Taxes @22%(22%*$68,850) 15,147 Earnings after taxes 53,703Related Questions
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