1. Use the financial statements for financial reasons to find Zumba Productions.

Question

1. Use the financial statements for financial reasons to find Zumba Productions.

It includes results in the spaces provided above. This sheet or on a separate sheet you have to show the calculations that led you to the result.

NOTE: If you do not include the calculations you will not receive the full credit even if the result is correct.

2. Prepare and interpret an analysis of the financial ratios showing the company.

3. Summarize your findings and make recommendations.

4. Use the Du Pont method explained in the material of this module for performance

on equity. What does this result?

Comment:

PLEASE INCLUDE ALL THE CALCULATIONS OF THE PROBLEMS*** CALCULATIONS ARE VERY IMPORTANT

Zumba Production Inc.'s income statement and balance sheet for 20x7 are presented below Zumba Production Inc. Income Statement Year Ended December 31, 20x7 $160,000 Sales Cost of Goods Solds Merchandise Inventory, Jan. 1, 2013 Purchases (net) Goods Available for Sale Merchandise Inventory, Dec. 31, 2013 S 208,400 37,320 S 171,080 65,080 Cost of Goods Sold Gross Profit Operating Expenses Income from Operations Other Income and Expense 106,000 S 54,000 37,000 S 17,000 Interest Expense Income before Tax Income Tax Expense 6,100 $ 10,900 4,360 Net Income $ 6,540

Explanation / Answer

Answer:

a. Current ratio=Current asset/Current liability=72000/69000=1.043 times

b. Quick ratio=Quick asset/Current liability=26500/69000=0.384 times

c.Inventory turnover=COGS/Inventory=106000/45500=2.33 times

d. Average collection period=(Average Receivables/Credit sale)*365 days

=(25000/160000)*365 days=57.03 days

e. Debt ratio=Debt/Equity=22950/58050=39.5 %

f.Times interest earned ratio=EBIT/Fixed interest expense=17000/6100=2.786 times

g. Gross margin ratio=(GP/Sales)*100=(54000/160000)*100=33.75%

h.Net profit ratio=(Net profit/Sales)*100=(6540/160000)*100=4.08%

i. Return on total sale=(Return /Total sale)*100=(6540/160000)*100=4.08%

j. Return on common equity=(Return/Common equity)*100=(6540/31500)*100=20.76%

k. Market/Book ratio=MArket/Book=2.076/10=0.2076

l. Working capital=CA-CL=72000-69000=3000

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