Question

Given the following information please construct a balance sheet and an income statement for the company. It provides software via a cloud subscription. There is n inventory All information in $000 Total Revenues Cash Common Stock Cost of Revenues Subscription Interest Expense Additional Paid in Capital Retained Earnings Cost of Revenues Professional Services 365 Gross Margin Short term securities Long term debt Accounts Receivable Accounts Payable Research &Development Marketing & Sales Other current liabilities Other current assets Investment income General & Administrative Expense 680 Depreciation Property & Equipment Goodwill Other long term assets Total Current Assets Total Operating Income Net Loss Total assets 5,374 908 651 925 16 3,954 (630) 4,084 87 2,328 1,906 1,103 793 2,757 3,287 649 10 448 1,126 3,783 2,234 3,550 (146) (600) 10,693 What is the gross margin as a % of sales? why is this important to the entrepreneur and the investor? What is the EBITDA? Why is this important? What is the interest coverage ratio? (EBITDA/ Interest expense) Why is this important? What is the current ratio? (Current assets /current liabilities) Why is this important to the investor and the entrepreneur? FR: 199

Answer 1

EBITDA Interest Expense Interest Coverage Ratio [EBITDA/ Interest Expense $302 Ref: Requirement-2] $16 18.88 $302/$16 18.88] Interest Coverage Ratio is important because it explains whether firm has ability to earn sufficient cash operating income to absorb interest expense. Total Current Assets Total Current Liabilities Current Ratio [Total Current Assets / Total Current Liabilities-$3,550 / $4,390 = 0.81] $3,550 S4,390 1$1,103+$3,287] 0.81 NOTE: Current Liabilities Accounts Payable + Other Current Liabilities Current Ratio is important to the investor and entrepreneur because this ratio explains whether firm maintains sufficient current assets to discharge its current liabilities. In other words, this ratio explains firm's liquidity position