Financial Ratios for Creditors [L013-1, Ld Problem 13-13B Common-Size Statements

Question

Financial Ratios for Creditors [L013-1, Ld Problem 13-13B Common-Size Statements and Crowley Building Supply sells various building materials to retail outlets. The company has just approached Sycamore State Bank requesting a $300,000 loan to strengthen the Cash account and to pay certain pressing short term obligations. The company's financial statements for the most recent two years follow Crowley Building Supply Comparative Balance Sheets This Year Last Year Assets Current assets Cash Marketable securities Accounts recelvable, net S 58,500 S 143,500 21,500 292,000 590,570 28,500 3,500 480,000 950,640 21,500 Prepaid expenses Total current assets Plant and equipment, net 1,514.140 1,645,620 1,076,070 1,550,580 Total assets $3,159,760 2,626,650 Liabilities and Stockholders' Equity Current liabilities Bonds payable, 8% S 810,000 618,500 S 449,000 618,500 Total liabilities 1,428,500 1,067,500 Stockholders' equity Preferred stock, $25 par, 7% Common stock, $10 par Retained earnings 322,000 514,000 895,260 322,000 514,000 723,150 Total stockholders' equity 1.731,260 1,559,150 Total labilities and stockholders Equity S 3,159,760 2,626,650 Crowley Building Supply Comparative Income Statement and Reconcliation This Year Last Year Sales Cost of goods sold $ 5,029,000 4,371,000 3,439,800 3,875,800 Gross margin Seling and adrministratve eupenses 1,153,200 653,700 931.200 534,700 Net operating income Interest expense 396,500 49.480 49.480 Net income before taxes Incnma 450,020 347,020 Type here to search

Explanation / Answer

calculation of ratios this year last year 1 working capital current assets - current liabilities 1514140-810000 1076070-449000 704140 627070 2 current ratio current assets / current liabilities 1514140/810000 1076070/449000 1.87 2.40 3 acid ratio acid assets / current liabilities acid assets current assets - inventory - prepaid expenses 1514140-950640-21500 1076070-590570-28500 542000 457000.00 acid ratio 542000/810000 457000/449000 0.67 1.02 4 average collection period (days * average accounts receivable )/ credit sales average accounts receivable (opening accounts receivable + closing accounts receivable )/ 2 (480000+292000)/2 (292000+259000)/2 386000 275500 average collection period (365*386000)/5029000 (365*275500)/4371000 28.02 days 23.01 days

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