PRACTICE CASE sntai of financial statements (L.G 5) Assume that selected informa

Question

PRACTICE CASE sntai of financial statements (L.G 5) Assume that selected information uillionsts of two major retailers, Ben Mart and Sue Mart are shown below. All from the 2011 annual reports humbers a BEN MartSUE Mart $ 37,028.0 $193,295.0 Cost of goods sold $ 7461.0 31,679.0 S (378.0) S 9,987.0 Net income (loss) assets: Cash and cash equivalents Trade accounts receivable (net) s 201.0 2,054.0 1,768.0 21,442.0 1200.0 5,412.0 11.0 S 7,624.0 Other current assets Total current assets 26.555.0 Total assets Long-term liabilities Total owners' equity 3,799.0 28,949 Total labilities $ 7,660.0 46,787.0 Total liabilities and owners' equity 14.6300 781300 REQUIRED 1. Compute the following ratios rounding computations to the nearest tenth of a percent a. Current ratio for the end of fiscal 2011 b. Quick ratio for the end of fiscal 2011. e. Accounts receivable turnover ratio for 2011. (Accounts receivable at the end of fiscal 2010: Ben Mart S1,300.0, Sue Mart $1,341.0) d. Inventory turmover ratio for 2011 (lnveatory at the end of fscal 2010. Ben Mart $7, 1010. Sue Mart $19,793.0) e. Debt ratio for the end of fiscal 2011. f. Times interest earned for 2011. g Gross profit margin for fiscal 2011 h. Profit margin for fiscal 2011. i. Total asset turnover for fiscal 2011. (Total assets at the end of fscal 2010. Ben Mart $15,140.0, Sue Mart $70,349.0) e ratios you computed in requirement I, which of the two companies would you as an l j- Return on total assets for fiscal 2011 2. Based on th

Explanation / Answer

Formula BEN Mart ($) SUE Mart ($) 1 Current Ratio (2011) = Current Assets / Current Liabilities Total Current Assets 7624 26555 (As given in the Question) Total Current Liabilities 3799 28949 (As given in the Question) Current Ratio (in times ) = 7624/3799 = 26555/28949 2.01 0.92 Formula BEN Mart ($) SUE Mart ($) 3 Quick Ratio = (Current Assets - Inventory) / Current Liabilities = (Current Assets - Inventory) Ben = 7624 - 5412 = $ 2212 2212 5113 Sue = 26555-21442 = $ 5113 Total Current Liabilities 3799 28949 Quick Ratio (in times) = 2212/3799 = 5113/28949 0.58 0.18 Formula BEN Mart ($) SUE Mart ($) 4 Accounts Receivable Turnover = Sales / Average Accounts Receivable Average Accounts Receivables =(Beginning + Ending )/2 295650 = (1300 + 1200)/2 = (1341 + 1768)/2 1250 1554.5 Sales (Net) 37028 193295 Accounts Receivable Turnover (times) = 37028 / 1250 = 193295/1554.50 29.62 124.35 Inventory Turnover = Cost of Goods Sold/ Average Inventory   Average Inventory   =(Beginning + Ending )/2 = 7101+5412 = 19793 + 21442 12513 41235 Cost of Goods Sold 29658 150255 Inventory Turnover (times) = 29658 / 12513 = 150255 / 41235 2.37 3.64

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