For Alvin company for 2014, calculate any four ratios. Give ratio name, formula,

Question

For Alvin company for 2014, calculate any four ratios. Give ratio name, formula, and calcilation, state of ratio, and one sentence of explaining each ratio.

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-- Additional Information:

a) Cash dividend of $ 57,000 were declared and Paid in 2014.

b) Weifgted-average common shares outstanding during 2014 was 60,000 shares.

c) Market value of common shares on December 31, 2014 was $ 18 per share.

d) Net cash provided by operating activities for 2014 was $ 63,000.

e) Net income before income taxes for 2014 was $ 102,000, income tax expense was $ 30,000, and net income was $ 72,000.

Alvin Company 2014 2015 cash $ 25,000 $ 40,000 Account receivable 65,000 90,000 Inventory 150,000 170,000 Property, Plant and equipment 160,000 200,000 Account Payble 20,000 30,000 Short-term notes Payble 40,000 90,000 Long-term bond Payble 80,000 160,000 Common shares 170,000 145,000 Retained earnings 90,000 75,000

Explanation / Answer

1) Current Ratio = Current Aassets / Current liabilities Current Assets = Cash + Accounts receivable + Inventory          = 25000 + 65000 +150000          = 240000 Current liability = Accounts payable + Short term notes payable             = 20000 + 40000              = 60000 Current ratio ( 2014) = 240000 / 60000 = 4 : 1 Current ratio measures a firms ability to pay off its short term liabilities with its current assets 2) Return on Asset Ratio = Net Income / total assets total asssets = 25000 + 65000 + 150000 + 160000      = 400000 Net Income = 72000 ROA = 72000 / 400000 18           = 18% ROA shows how efficiently a company can convert the money used to purchase assets into net income or profits 3) Earning per share = Net Income / Weighted Average Common shares outstanding Net Income = 72000 Weighted average common shares outstanding = 60000 Earning per share = 72000 / 60000               = 1.2 Earning per share is net income earned per share of stock outstanding 4) Gross Profit ratio = Gross Profit / Net Sales * 100 Gross Profit = Net Sales - Cost of goods sold    = 360000 - 184000    =176000 Gross Profit Ratio = 176000 / 360000 * 100                 = 48.89% Gross Profit ratio shows the money left over from revenues after accounting for Cost of goods sold

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