Question 1 The following are the financial statements of Rigolo Inc. Balance she
ID: 2524409 • Letter: Q
Question
Question 1
The following are the financial statements of Rigolo Inc.
Balance sheet
20116
2015
Assets
Current assets
Cash & cash equivalents
Account receivables
Inventory
Other current assets
Total current assets
L.T. Assets
PPE
Total Assets
Liabilities & Shareholders’ Equity
Current liabilities
Accounts payable
Current maturities of notes payable
Accrued expenses
Other current liabilities
Total current liabilities
L.T. Liabilities
Bank loans
Total liabilities
Shareholders’ equity
Common stock
Retained earnings
Total shareholders equity
Total shareholders equity & liab.
The balance is well-balanced
4,100
2,733,148
1,389,390
13,901
4,140,539
322,586
4,463,125
276,556
1,834,858
151,817
128,632
2,391,863
1,824,764
4,216,627
46,499
199,999
246,498
4,463,125
3,100
1,941,002
1,468,257
0
3,412,359
60,640
3,472,999
256,419
337,881
169,067
161,905
925,272
2,400,000
3,325,272
46,499
101,228
147,727
3,472,999
Statement of income
2016
2015
Revenue
Cost of Good Sold
Gross profit on sales
Operating expenses
Repairs and maintenance
Depreciation & Amortization
Interest expense
Total expenses
Net income before taxes
Provision for income taxes
Net income
$17,285,211
14,947,152
2,338,059
1,871,538
84,483
25,688
215,246
2,196,955
141,104
42,333
98,771
$13,999,979
11,920,400
2,079,579
1,529,231
107,123
24,410
255,003
1,915,767
163,812
65,525
98,287
Rigolo Inc, has paid $10,000 to its preferred shareholders in 2016
Tasks: (i) Compute the ROA
(ii) Compute the ROCE
(iii) Compute the Account Receivable Turnover
(iv) Compute the Inventory Turnover
(v) Compute the Basic EPS
(vi) Compute the diluted EPS
20116
2015
Assets
Current assets
Cash & cash equivalents
Account receivables
Inventory
Other current assets
Total current assets
L.T. Assets
PPE
Total Assets
Liabilities & Shareholders’ Equity
Current liabilities
Accounts payable
Current maturities of notes payable
Accrued expenses
Other current liabilities
Total current liabilities
L.T. Liabilities
Bank loans
Total liabilities
Shareholders’ equity
Common stock
Retained earnings
Total shareholders equity
Total shareholders equity & liab.
The balance is well-balanced
4,100
2,733,148
1,389,390
13,901
4,140,539
322,586
4,463,125
276,556
1,834,858
151,817
128,632
2,391,863
1,824,764
4,216,627
46,499
199,999
246,498
4,463,125
3,100
1,941,002
1,468,257
0
3,412,359
60,640
3,472,999
256,419
337,881
169,067
161,905
925,272
2,400,000
3,325,272
46,499
101,228
147,727
3,472,999
Explanation / Answer
i) Return on assets = net income / total assets x 100
For 2015: 98,287 / 3,472,999
= 2.83%
For 2016: 98,771 / 4,463,125
= 2.21%
ii) Return on Capital Employed = Net Income / Capital Employed
Capital Employed = Total Assets - Current Liabilities
OR
Shareholders' Equity + Long Term Liabilities
For 2015 = 147,727 + 2,400,000 = $2,547,727
For 2016 = 246,498 + 1,824,764 = $2,071,262
ROCE:
For 2015 = 98,287 / 2,547,727 = 3.85%
For 2016 = 98,771 / 2,071,262 = 4.77%
iii) Account Receivable Turnover = Revenue / Average Accounts Receivable
For 2015: 13,999,979 / 1,941,002 = 7.21 times
Note: Average accounts receivable for 2015 could not be calculated, therefore closing accounts receivable has been used instead.
For 2016: 17,285,211 / (1,941,002 + 2,733,148)/2
= 7.34 times
iv) Inventory Turnover Ratio = Cost of Goods Sold / Average Inventory
For 2015: 11,920,400 / 1,468,257 = 8.12 times
For 2016: 14,947,152 / (1,468,257 + 1,389,390)/2
= 10.46 times
v) Basic EPS = Net income after preference dividend / Number of Equity Shares
vi) Diluted EPS = Net income after preference dividend / (Number of Equity shares + number of convertible shares and/or bonds)
Since the details of the number of Equity or convertible shares have not been provided, basic and diluted EPS cannot be calculated.
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