The 2009 financial statement for the Griffin Company are as follows: ___________
ID: 2422059 • Letter: T
Question
The 2009 financial statement for the Griffin Company are as follows: ____________________________________________________________12/31/12_________12/31/11 ASSETS Cash $40,000 $10,000 Accounts receivable 30,000 55,000 Inventory 110,000 70,000 Property,plant and equipment 250,000 257,000 Total assets 430,000 392,000 Liabilities and stockholders' Equity Current liabilities $60,000 $50,000 5% mortgage payable 120,000 162,000 Common stock (30,000) 150,000 150,000 Retained earnings 100,000 30,000 total liabilities and stockholders' equity 430,000 392,000 Griffin company: Income statement for the year ended December 31, 2012 Sales on Account $420,000 Less expenses Cost of goods sold $214,000 Salary expense $50,000 Depreciation expenses $7,000 Interest expense $9,000 Total expenses $280,000 Income before taxes $140,000 Income tax expense(50%) $70,000 Net Income $70,000 required Compute the following ratios for the Griffin Company for the year ending December 31,2012 A. Profit margin ratio(before interest and taxes) B.Total asset turnover C.Rate of return on total assets D.Rate of return on common stockholders' equity E.Earnings per share of stock F.Inventory turnover G.Current ratio H.Quick ratio I. Accounts receivable turnover J.Debt-to-equity ratio K.Times interest earned
Explanation / Answer
Balance Sheet 31-12-12 31-12-11 Assets Cash 40000 10000 Accounts Receivable 30000 55000 Inventory 110000 70000 Property Plant & Equipment 250000 257000 Total Assets 430000 392000 Liabilities and Equity Current liabilities 60000 50000 5% mortgage payable 120000 162000 Common stock 150000 150000 Retained Earnings 100000 30000 Total liabilities and equity 430000 392000 Income Statement as on 31/12/2012 Sales on Account 420000 Less : Cost of goods sold 214000 Gross Profit 206000 Less : Expenses Salaries Expenses 50000 Depriciation Expense 7000 Interest Expense 9000 66000 Income before tax 140000 Income tax @ 50% 70000 Net Income 70000 A. Profit Margin Ratio ( before interest and tax) A. Profit Margin Ratio = Net Income before interest and tax / Net Sales =Income before tax + Interest /Net Sales * 100 = ( 140000 +9000) /420000 * 100 = 149000 / 420000*100 = 35.48% B . Total Asset Turnover Total Asset Turnover = Net Sales / Average Total assets Average Total Asset = ( opening total asset + closing Total assets) / 2 = ( 392000 + 430000) /2 = 822000 /2 = 411000 Total Asset Turnover = 420000 / 411000 = 1.02 C. Rate of return on total Assets = EBIT / Average Total Asets = 149000 /411000 *100 = 36.25% D. Rate on return on common stockholders = Net Income / Shareholders equity = 70000 / 150000 * 100 = 46.67% E Earning per share = Net Income / Number of shares outstanding = 70000 / 30000 = 2.33 F. Inventory turnover = Cost of goods sold / Average Inventory Average Inventory = ( opening inventory + closing inventory ) / 2 = ( 70000 + 110000) /2 = 180000/2 = 90000 G. Current Ratio = Current Asset / Current Liabilities = (Total asset - Property plant and equipment )/ ( current liabilities + 5% mortgage payable) = ( 430000 - 250000) / ( 60000 + 120000) = 180000 / 180000 = 1 H Quick Ratio = ( Current Asset - Inventory) / Current liabilities = ( 180000 - 110000 ) / 180000 = 70000 / 180000 = 0.39 I Account reveivable Turnover = Net Credit Sales / Average Receivables Average Recievable = ( opening receivable + closing receivable) /2 = ( 55000 + 30000 ) /2 = 85000 /2 = 42500 Accounts receivable Turnover = 420000 / 42500 =9.88 days J Debt to equity ratio = total liabilities / Shareholders equity = (current liabilities + 5% mortgage payable) / ( equity + retained earnings) = ( 60000 + 120000 ) /( 150000 +100000) = 180000 / 250000 = 0.72 K. Times Interest earned = Earning before earning and tax / Interest expense = ( 140000 + 9000) /9000 = 149000 /9000 = 16.56
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