Bradburn Corporation was formed 5 years ago through a public subscription of com

Question

Bradburn Corporation was formed 5 years ago through a public subscription of common stock. Daniel Brown, who owns 15% of the common stock, was one of the organizers of Bradburn and is its current president. The company has been successful, but it currently is experiencing a shortage of funds. On June 10, Daniel Brown approached the Topeka National Bank, asking for a 24-month extension on two $ 35,000 notes, which are due on June 30, 2013, and September 30, 2013. Another note of $ 6,000 is due on March 31, 2014, but he expects no difficulty in paying this note on its due date. Brown explained that Bradburn

Explanation / Answer

1. Current ratio =Current assets/Current liabilities 2010: 320000/158500=2.02 2011: $403,000/$164,000= 2.46 2. Quick Ratio=(Current assets – Inventories)/Current liabilities 2010: $270,000/$158,500=1.70 2011:$298,000/$164,000 = 1.82 3. Inventory turnover =Cost of goods sold/Average inventory 2011: $1,530,000/($50,000 + $105,000)/2 = 19.7 times (every 18.5 days) 4. Return on assets =Net income/Average total assets 2010: $297,000/($1,688,500 + $1,740,500)/2 = 17.3% 2011:$366,000($1,740,500 + $1,852,000)/2 = 20.4% 5. Percent Changes= sales=300,000/2,700,000=11.11% Cost of goods sold=105000/1425000=7.37% Gross margin=195000/1275000=15.29% Net income after taxes=69/297=23.23%

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