Cadux Candy Company’s income statement for the year ended
December 31, 2021, reported interest expense of $12 million and
income tax expense of $122 million. Current assets listed in its
balance sheet include cash, accounts receivable, and inventory.
Property, plant, and equipment is the company’s only noncurrent
asset. Financial ratios for 2021 are listed below. Profitability
and turnover ratios with balance sheet items in the denominator
were calculated using year-end balances rather than
averages.
Debt to equity ratio | 0.7 | |
Current ratio | 2.0 | |
Acid-test ratio | 1.0 | |
Times interest earned ratio | 17 | times |
Return on assets | 10 | % |
Return on equity | 17 | % |
Profit margin on sales | 5 | % |
Gross profit margin (gross profit divided by net sales) |
40 | % |
Inventory turnover | 8 | times |
Receivables turnover | 20 | times |
Required:
Prepare a December 31, 2021, balance sheet for the Cadux Candy
Company
Cadux Canoy Company | |||
Balance Sheet | |||
At Dec. 31, 2021 (amount in $millions) | |||
Assets | Liabilities | ||
cash | 35 | current liabilities | 105 |
accounts receivable | 70 | non-current liability | 183 |
inventory | 105 | ||
total current assets | 210 | ||
non-current assets | total liabilities | 288 | |
property,plant and equipment | 490 | stockholders equity | 412 |
total assets | 700 | total liabilities and stockholders equity | 700 |
please refer to the below calculations for getting the above figures
times interest earned ratio | EBIT/interest expense |
times interest earned ratio | 17 |
interest expense | 12 |
EBIT (times interest earned*interest expense) | 204 |
EBIT | 204 |
less:interest expense | -12 |
EBT | 192 |
less:tax | -122 |
net income | 70 |
profit margin on sales | (net income / sales)*100 |
profit margin on sales | 5% |
net income | 70 |
sales | 1400 |
gross profit margin | (gross proift / sales)*100 |
gross profit margin | 40% |
sales | 1400 |
gross profit | 560 |
cost of goods sold (sales*60%) | 840 |
inventory turnover ratio | cost of goods sold / ending inventory |
inventory turnover ratio | 8 |
cost of goods sold | 840 |
ending inventory | 105 |
receiables turnover ratio | sales / ending receivable |
receiables turnover ratio | 20 |
sales | 1400 |
ending receivable | 70 |
return on equity | net income / shareholders equity |
return on equity | 17% |
net income | 70 |
shareholders equity | 412 |
return on assets | net income / total assets |
return on assets | 10% |
net income | 70 |
total assets | 700 |
debt equity ratio | total liabilities / shareholders equity |
debt equity ratio | 0.7 |
shareholders equity | 412 |
total liabilities | 288 |
current ratio | current assets / current liabilites |
current ratio | 2 |
current liabilities | current assets/2 |
current asset | cash+accounts receivable+inventory |
acid test ratio | quick assets / current liabilities |
acid test ratio | 1 |
current liabilites | quick assets |
quick assets | cash+accounts receivable |
(cash+70+105)/2 | cash + 70 |
cash+70+105 | 2cash+140 |
cash | 35 |
sales | 1400 |
less:cost of goods sold | -840 |
gross profit | 560 |
less:operating expenses | -356 |
EBIT | 204 |
less:interest expenses | 12 |
EBT | 192 |
less:tax | -122 |
net income | 70 |
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