Financial Statement Analysis (Short Answer) Mugs Company Comparative Balance She
ID: 2375583 • Letter: F
Question
Financial Statement Analysis (Short Answer)
Mugs Company
Comparative Balance Sheet
December 31, 2007 2007 2006
Assets
Cash $25,000 $40,000
Marketable securities 20,000 60,000
Accounts Receivable (net) 40,000 30,000
Inventory 150,000 170,000
Property,plant
and equipment (net) 170,000 200,000
Total Assets $405,000 $500,000
Liabilities and stockholders' equity
Accounts payable $ 25,000 $ 30,000
Bond Interest payable 40,000 90,000
Bonds payable 75,000 160,000
Common Stock 175,000 145,000
Retained earnings 90,000 75,000
Total liabilities and
stockholders' equity $405,000 $500,000
Mugs Company
Income Statement
For the Year Ended 12/31/07
Net Sales $360,000
Cost of goods sold 184,000
Gross profit 176,000
Expenses
Interest Expense $21,000
Selling Expense 30,000
Administrative Expenses 20,000
Total expenses 71,000
Income before income taxes 105,000
Income tax expense 30,000
Net Income $75,000
Additional Information:
Cash dividends of $50,000 were declared and paid in 2007.
Weighted average number of shares of common stock outstanding during 2007 were 62,000 shares.
Market value of common stock on December 31,2007 was $15 per share.
Net cash provided by operating activities for 2007 was $65,000.
Using the financial statements and additional information, compute the following ratios for the Mugs Company for 2007. You need to label your ratios and show your calculations for maximum credit. (I know that's tedious, but it's very difficult to give partial credit for incorrect answers if I can't see how you made the calculation.)
1. Current ratio
2. Return on common stockholders' equity
3. Price-earnings ratio
4. Inventory turnover ratio
5. Average days in inventory
6. Receivable turnover
7. Average days to collect receivables
8. Profit margin ratio
9. Payout ratio
10.Return on assets (Points : 20)
Explanation / Answer
Hi,
Please find the answers as follows:
Current ratio = Current Assets/Current Liabilities = (25000 + 20000 + 40000 + 150000)/(25000 + 40000) = 3.62
Return on common stockholder's equity = Net income/Common Stock = 75000/175000*100 = 42.86%
Earnings Per Share = Net Income/Number of outstanding shares = 75000/62000 = 1.21
Price earnings ratio = Market Price per share/Earnings per share = 15/1.21 = 12.40
Inventory turnover ratio = Cost of Goods Solde/Average Inventory = 184000/(150000+170000)/2 = 1.15 times
Average days in inventory = 365/Inventory Turnover Ratio = 365/1.15 = 317.39 days
Receivable turnover = Net Sales/Average Accounts Receivables = 360000/(40000 + 30000)/2 = 10.29 times
Average days to collect receivables = = 365/Receivable turnover = 365/10.29 = 35.47 days
Profit margin ratio = Net Income/Net Sales*100 = 75000/360000*100 = 20.83%
Payout ratio = Yearly dividend per share/EPS = (50000/62000)/1.21 = 66.65%
Return on assets = Net income/Total assets = 75000/405000*100 = 18.52%
Thanks.
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