Tribke Enterprises collected the following data from it financial reports for 20

Question

Tribke Enterprises collected the following data from it financial reports for 2012:

Stock price                                               $18.37
Inventory balance                                    $300,000
Expenses (excluding COGS)                   $1,120,000
Shares outstanding    290,000
Average issue price of shares $5.00
Gross margin % 40%
Interest rate                                              8%
TIE ratio    8
Inventory turnover                                    12 x
Current ratio                                             1.5
Quick ratio                                                .75
Fixed asset turnover                                1.5

Complete the following abbreviated financial statements, and calculate per share ratios indicated. (Hint: Start by subtracting the formula for the quick ratio from that for the current ratio and equating that to the numerical difference.)

Set up an income statement that includes revenue, COGS, GM, EBIT, EBT, and EAT. Set up a balance sheet that includes Current assets, Fixed assets, Total assets, current liabilities, long-term debt, Equity (paid in capital*, and retained earnings), total equity, and total liabilities & equity.

*Paid-in capital = Common Stock + Paid-in Excess

Explanation / Answer

(a)

Quick ratio = Current Ratio - (Inventory / Current liabilities, CL)

0.75 = 1.5 - (300,000 / CL)

(300,000 / CL) = 0.75

CL = 300,000 / 075 = $400,000

(b) Inventory turnover, ITOR = COGS / Inventory

12 = COGS / $300,000

COGS = 12 x $300,000 = $3600,000

(d) Gross margin = 40%, so COGS = 60% of sales

$3600,000 = 60% of sales

Sales = $6,000,000

(d) Fixed asset turnover ratio = Sales / Fixed asset

1.5 = $6,000,000 / Fixed asset

Fixed asset = $6,000,000 / 1.5 = $4,000,000

(e) EBIT = Gross profit - expenses

= 40% x $6,000,000 - $1,120,000 = $1,280,000

(e) TIE = EBIT / Interest

8 = $1,280,000 / Interest

Interest = $1,280,000 / 8 = $160,000

(f) Interest rate = 8%

So, 8% x Debt = $160,000

Debt = $160,000 / 0.08 = $2,000,000

(g) Net income = Retained Earnings = $450,000

(h) EPS = Net income / Number of shares outstanding = $450,000 / 290,000 = $1.55

(i) P/E = Share price / EPS = $18.37 / $1.55 = 11.85

The balance sheet and income statement as follow.

(a) Balance Sheet

(b) Income statement

$ $ Inventory 3,00,000 Curent Liabilities 4,00,000 Current Assets 3,00,000 Non-current liabilities (LT Debt) 20,00,000 Total liabilities 24,00,000 Fixed Assets 40,00,000 Equity Paid in capital 14,50,000 Retained earnings (Balance Figure) 4,50,000 Total Assets 43,00,000 Equity + Liabilities 43,00,000

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