Question

In the Chapter Eight homework you were given the following information on ABC Enterprises. In its closing financial statements for its first year in business, ABC Enterprises, had cash of $242, accounts receivable of $850, inventory of $820, net fixed assets of $3,408, accounts payable of $700, short-term notes payable of $740, long-term liabilities of $1,100, common stock of $1,160, retained earnings of $1,620, net sales of $2,768, cost of goods sold of $1,210, depreciation of $160, other operating expenses of $200, interest expense of $160, taxes of $312, addition to retained earnings of $508, and dividends paid of $218. Calculate the following ratios: Return on equity Return on total assets Net profit margin Gross profit margin Sales to asset ration Current Ratio Total-debt-total-asset ratio Debt-to-equity ratio Equity multiplier Interest coverage ratio Submit your answers through Blackboard.

Answer 1

Equity =Common Stock +retained earnings =1160+1620 =2780
Net Income =Retained earnings + Dividend =508+218 =726
Total assets =Cash +Account receivable + Inventory+ Net fixed assets =242+850+820+3408=5320
Gross Profit =Sales-Cost of Goods Sold-Depreciation-Other operating expenses =2768-1210-160-200 =1198

Return on equity =Net Income/Equity =726/2780 =26.12%
Return on total assets =Net Income/Total =726/5320 =13.65%
Net Profit Margin =Net Income/Sales =726/2768=26.23%
Gross Profit Margin =Gross Profit/Sales =1198/2768 =43.28%
Sales to assets ratio =2768/5320=52.03%