Question

4-22 1 year from now? BALANCE SHEET ANALYSIS Complete the balance sheet and sales information using the following financial data: Total assets turnover: 1.5% Days sales outstanding: 36.5 days Inventory turnover ratio: 5x Fixed assets turnover: 3.0% Current ratio: 2.0x Gross profit margin on sales: (Sales - Cost of goods sold)/Sales = 25% Calculation is based on a 365-day year. 60.000 Cash Accounts receivable Inventories Fixed assets Total assets Balance Sheet Current liabilities Long-term debt Common stock Retained earnings $300,000 Total liabilities and equity Cost of goods sold 97,500 Sales 4-23 RATIO ANALYSIS Data for Barry Computer Co. and its industry averages follow. The firm's debt is priced at par, so the market value of its debt equals its book value. Since dol- lars are in thousands, number of shares are shown in thousands too. a. Calculate the indicated ratios for Barry b. Construct the DuPont equation for both Barry and the industry. c. Outline Barry's strengths and weaknesses as revealed by your analysis. d. Suppose Barry had doubled its sales as well as its inventories, accounts receivable, and common equity during 2018. How would that information affect the validity of your ratio analysis? (Hint: Think about averages and the effects of rapid growth on ratios if averages are not used. No calculations are needed.) Barry Computer Company: Balance Sheet as of December 31, 2018 (in Thousands) Cash $ 77,500 Accounts payable Receivables 336,000 Other current liabilities Inventories 241,500 Notes payable to bank Total current assets $ 655,000 Total current liabilities Long-term debt Net fixed assets 292,500 Common equity (36,100 shares) Total assets $ 947,500 Total liabilities and equity $129,000 117,000 84.000 5330,000 256,500 361,000 $947,500 Copyright 2019 Cangage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203 www wwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwww

Answer 1

Q 4-22)

Answer:-

Given

Total Asset Turnover = sales / total assets = 1.5
Days sales outstanding = 365 / receivables turnover = 36.5
Inventory turnover ratio = COGS / average inventory = 5
Fixed assets turnover = revenue / average net fixed assets = 3
Current ratio = current assets / current liabilities = 2
Gross profit margin = ( sales - COGS) / sales = 25% =0.25
Total Assets = $ 300000
Long term debt = $ 60000
Retained earnings = $ 97500

sales / total assets = 1.5
sales = 1.5 x total assets = 1.5 x $ 300000 = $ 450000

($ 450000 - COGS) / $ 450000 = 0.25
$ 450000 - COGS = 0.25 x $ 450000 = $ 112500
COGS = $ 450000 - $ 112500
COGS = $ 337500

COGS / average inventory = 5
$ 337500 / average inventory = 5
Average inventory = $ 337500 / 5 = $ 67500

revenue / average net fixed assets = 3
$ 450000 / average net fixed assets = 3
Average net fixed assets = $ 450000 / 3 = $ 150000

365 / receivables turnover = 36.5
receivables turnover = 365 / 36.5 = 10
receivables turnover = sales / receivables = 10
receivables = sales / 10 = $ 450000 / 10 =$ 45000

cash + accounts receivable + inventory + fixed assets = Total assets
cash + $ 45000 + $ 67500 + $ 150000 = $ 300000
cash = $ 300000 - $ 45000 - $ 67500 - $ 150000
cash = $ 300000 - 262500
cash = $ 37500

Current assets = cash + accounts receivable + inventory
Current assets = $ 37500 + $ 45000 + $ 67500
Current assets = $ 150000

Current assets / Current liabilities = 2
$ 150000 / Current liabilities = 2
Current liabilities = $ 150000 / 2
Current liabilities = $ 75000

Total liabilities + equity = Total Assets = $ 300000

Current liabilities + long term debt + common stock + retained earnings = Total liabilities and equity
$ 75000 + $ 60000 + common stock + $ 97500 = $ 300000
common stock = $ 300000 - $ 75000 - $ 60000 - $ 97500
common stock = $ 300000 - $ 232500
common stock = $ 67500

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