10 Points Bond\'s Bait and Tackle 2013 & 2014 Balance Sheets ($ in thousands) 20
ID: 2438079 • Letter: 1
Question
10 Points Bond's Bait and Tackle 2013 & 2014 Balance Sheets ($ in thousands) 2013 2014 2013 2014 Cash $70 $180 Accounts payable $1,350 $1,170 Accounts receivable $980 $840 Long-term debt $720 $500 Inventory $1,560 $1,990 Common stock $3,200 $3,500 Total $2,610 $3,010 Retained earnings $940 $1,200 Net fixed assets $3,600 $3,360 Total assets $6,210 $6,370 Total liabilities & equity $6,210 $6,370 Bond's Bait and Tackle 2014 Income Statement ($ in thousands) Net sales $5,680 Cost of good sold $4,060 Depreciation $420 EBIT $1,200 Interest paid $30 Taxable income $1,170 Taxes $410 Net Income $760 1) What is the times interest earned ratio for 2014? 2) What is the debt-equity ratio for 2014? 3) What is the equity multiplier for 2014? 4) What is the return on equity for 2014? 5) In 2014, how many days on average did it take Mr. Bond to sell his inventory? 10 Points Bond's Bait and Tackle 2013 & 2014 Balance Sheets ($ in thousands) 2013 2014 2013 2014 Cash $70 $180 Accounts payable $1,350 $1,170 Accounts receivable $980 $840 Long-term debt $720 $500 Inventory $1,560 $1,990 Common stock $3,200 $3,500 Total $2,610 $3,010 Retained earnings $940 $1,200 Net fixed assets $3,600 $3,360 Total assets $6,210 $6,370 Total liabilities & equity $6,210 $6,370 Bond's Bait and Tackle 2014 Income Statement ($ in thousands) Net sales $5,680 Cost of good sold $4,060 Depreciation $420 EBIT $1,200 Interest paid $30 Taxable income $1,170 Taxes $410 Net Income $760 1) What is the times interest earned ratio for 2014? 2) What is the debt-equity ratio for 2014? 3) What is the equity multiplier for 2014? 4) What is the return on equity for 2014? 5) In 2014, how many days on average did it take Mr. Bond to sell his inventory?Explanation / Answer
Answer 1.
Times Interest Earned Ratio = EBIT / Interest
Times Interest Earned Ratio = $1,200 / $30
Times Interest Earned Ratio = 40
Answer 2.
Debt-Equity Ratio = Total Liabilities / Total Stockholders’ Equity
Debt-Equity Ratio = (Accounts Payable + Long-term Debt) / (Common Stock + Retained Earnings)
Debt-Equity Ratio = ($1,170 + $500) / ($3,500 + $1,200)
Debt-Equity Ratio = $1,670 / $4,700
Debt-Equity Ratio = 0.36
Answer 3.
Equity Multiplier Ratio = Total Assets / Total Stockholders’ Equity
Equity Multiplier Ratio = $6,370 / $4,700
Equity Multiplier Ratio = 1.36
Answer 4.
Average Stockholders’ Equity = ($3,200 + $940 + $3,500 + $1,200) / 2
Average Stockholders’ Equity = $4,420
Return on Equity = Net Income / Average Stockholders’ Equity
Return on Equity = $760 / $4,420
Return on Equity = 17.19%
Answer 5.
Average Inventory = ($1,560 + $1,990) / 2
Average Inventory = $1,775
Days Sales in Inventory = 365 * Average Inventory / Cost of Goods Sold
Days Sales in Inventory = 365 * $1,775 / $4,060
Days Sales in Inventory = 159.58 days
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