The financial statements for Thor and Gunnar companies are summarized here: Thes

Question

The financial statements for Thor and Gunnar companies are summarized here:

These two companies are in the same business and state but different cities. Each company has been in operation for about 10 years. Both companies received an unqualified audit opinion on the financial statements. Thor Company wants to borrow $110,000 and Gunnar Company is asking for $41,000. The loans will be for a two-year period. Neither company issued stock in the current year. Assume the end-of-year total assets and net equipment balances approximate the year’s average and all sales are on account.

Calculate the following ratios. (Use 365 days in a year. Round your intermediate calculations and final answers to 2 decimal places.)

The financial statements for Thor and Gunnar companies are summarized here:

Thor
Company Gunnar
Company   Balance Sheet   Cash $ 40,000 $ 37,000   Accounts Receivable, Net 82,000 33,000   Inventory 164,000 40,000   Equipment, Net 780,000 202,000   Other Assets 201,000 73,400   Total Assets $ 1,267,000 $ 385,400   Current Liabilities $ 178,000 $ 28,000   Note Payable (long-term) (12% interest rate) 276,000 76,000   Common Stock (par $20) 677,000 257,000   Additional Paid-in Capital 75,000 9,800   Retained Earnings 61,000 14,600   Total Liabilities and Stockholders’ Equity $ 1,267,000 $ 385,400   Income Statement   Sales Revenue $ 1,135,000 $ 351,000   Cost of Goods Sold 677,000 185,000   Other Expenses 341,000 119,000   Net Income $ 117,000 $ 47,000   Other Data   Per share price at end of year $ 14.00 $ 29.00   Selected Data from Previous Year   Accounts Receivable, Net $ 70,800 $ 32,200   Inventory 138,000 50,600   Equipment, Net 780,000 202,000   Note Payable (long-term) (12% interest rate) 276,000 76,000   Total Stockholders’ Equity 813,000 281,400

These two companies are in the same business and state but different cities. Each company has been in operation for about 10 years. Both companies received an unqualified audit opinion on the financial statements. Thor Company wants to borrow $110,000 and Gunnar Company is asking for $41,000. The loans will be for a two-year period. Neither company issued stock in the current year. Assume the end-of-year total assets and net equipment balances approximate the year’s average and all sales are on account.

Required:

Calculate the following ratios. (Use 365 days in a year. Round your intermediate calculations and final answers to 2 decimal places.)

Ratio Thor Company Gunnar Company Tests of Profitability: 1. Net Profit Margin % % 2. Gross Profit Percentage % % 3. Fixed Asset Turnover 4. Return on Equity % % 5. Earnings per Share 6. Price/Earnings Ratio Tests of Liquidity: 7. Receivables Turnover Days to Collect days days 8. Inventory Turnover Days to Sell days days 9. Current Ratio Tests of Solvency: 10. Debt-to-Assets Ratio

Explanation / Answer

Ratio Thor Gunnar Tests of profitability Net profit margin 10.31% 13.39% Gross profit percentage 40.35% 47.29% Fixed asset turnover 1.46 1.74 Return on equity 14.39% 16.70% Earnings per share 2.01 4.84 Price/earnings ratio 6.95 5.99 Tests of liquidity Receivables turnover 14.86 10.77 Days to collect 24.57 33.90 Inventory turnover 4.48 4.08 Days to sell 81.41 89.38 Current ratio 1.61 3.93 Tests of solvency Debt to asset ratio 0.22 0.20

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.