Question

Chapter 13 Homework (Algo) 0 The financial statements for Royale and Cavalier companies are summarized here: Royale Company Cavalier Company Dont ebook Balance Sheet Cash Accounts Receivable, Net Inventory Equipment, Net Other Assets Total Assets Current Liabilities Note Payable long-tera) Common Stock (par 520) Additional Paiden Capital Retained Tarnings Total Liabilities and Stockholders' Equity Income Statement Sales avenue Cost of Goods sold Other Expenses Net Income Other Data Por ahore price at end of year Selected Data from previous Year Accounts Receivable, Net Note Payable long-term) Equipment. Het Triventory Total Stockholders' Equity $15.000 45,000 90,000 530,000 130,000 $810,000 $100,000 170,000 470.000 40,000 30,000 $310.000 30.000 6.000 5.000 140,000 36,000 $267.000 17.000 35,000 200.000 9,000 6.000 $267.000 $270,000 470.000 230.000 $ 70,000 $250.000 140,000 85.000 $ 25,000 5 20.00 $ 16.00 $ 37,000 170,000 530,000 85,000 540,000 $ 4,000 35.000 140,000 28,000 215,000 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. Royale Company wants to borrow $65,000 cash and Cavalier Company is asking for $20,000. The loans will be for a two-year period. Both companies estimate bad debts based on an aging analysis, but Cavalier has estimated slightly higher uncollectible rates than Royale. 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.

Answer 1

solution - Given data 1) Determine the Net profit margin for the both the companies as shown below Net income Formula a Net profit margin=- sales revenue calculation Ratio 1 Royall company cavalier company Net income ca) $70,000 25,000 Sales Revenue (b) $770,000 $ 250.000 Net profit marggin(a+b) 90.9% Determine the Grooss profit percentages as shown below Formula Grooss margin a Gross profit percentage- sales Revenue cavalies company 1.$ 250.000 calculation Ratio Royale company Sales Revenue (a) $ 770.000 cost of Goods sold (b) $470.000 Crapss maagin (cab) | $300000 | Gooss profit percentage 38.96% $ 100.000 $ 110000

③ Determine th fixed Asset Tyonover as shoron below Sales Revenue toomula > Finked Asset tuomes Monitor Average Fixed assets Royall company $4770.000 Cavalier company $250,000 $530,000 $ 140.000 Patio sales Revenue [a) Beginning Fixed Assets TEquipment Net] (b) Ending fired Assers [Equipment. uet] (c) Avegage fiped Assets[d-(btc). Fized assets tudnover [9/d] $530.000 $140.000 $ 140,000 $530,000 lys 1.78 0 Determine the peturn on Equity as shown below. Formula a Retuon on Equity . Net income Avesage stock holded's Equity calculation Ratio Royall company cavalies company Year-End common stock ca] 470,000 200.000 Additional Paid-in capital (6) 110.000 9.000 Betained Earnings (c) 30.000 6.000 Ending Total Stock holder's Equity 540000 215000 rib

calculation Beginning Total stock holder's Equity (e) $540,000 $215.000 Avenage Total stock holder's Equity [F = (d te)/2) Net income [g] Return on Equity [g/E $540000 $70,000 12.96% $215,000 $257000 11.627. I Determine the coarings peo shag as shown below Formula Earning pero shape - Net income Number of shares outstanding Calecelation Ratio Royale company cavalies company Net income (a) $ 70.000 $25,000 common stock (6) 9470.000 900000 number of shares outstanding [e-b $20 each) 10.000 23,500 - Euroning per share ca/c I $2.97 $ 205 6) Determine the price / Earsnings Ratio as shown below toomuld a Boice/Coon and son mansket price pershare. ning Pation Eashing peoshare

calculation Ratio cavalicany Net income (a) Royale company $ 70.000 $470,000 $25,000 $ 200,000 d 23500 common stock (b) number of shapes outstanding (c-b320 each) Eashing per shape [a= a () market price per shave (e) Poice (Earoning pershage (en $2.97 $20 6.73 $10000 $2.5 $ 60 24 Tests of Liquidity 7) Determine the receivabres collect as shown below Turnover and days to Formulas Receivables Tubroves sales Revenue I receivables Turnover Average Account Receivables. Net pays to collect crimen I Days to collect 365 days Receivable Turnover

calculation 3 Ratio fogale company cavalies com fa. sales Revenue (a). $770.000 $ 250.000 Beginning Account Receivables ovet (b) 337000 3 $45.000 $6.000 Ending Account Receruables. Net (2) Average account reconvable owed [d=(619/2 & 41000 $5000 Receivables turnover [e-ald 18.78 50 Days to collect [365 days ) 19:43 703 & determine the inventory Turnoves and days to sell as shown below a Foomulag Inventory Turnovers Cost of Goods sold a Aveoage Inventory Days to sell a 365 days at Inventory Turnover calculation Ratio cost of Goods sold (a) Beginning Inventory (b) Ending Inventory (e) Average Inventory [d2b+6)/2) Inventory Turnover [e-ald Dags to sell [365 days le] Royale company cavalies compone $470,000 $140.000 $85.000 $28.000 $ 90,000 $5,000 $87500 $16500 5. 37 18:48 67.07 I 13.04.

Ratio reconover ang Days to current Deteromine the preventory sell as shown below Formulas current Ratio - cuorent Assets casoent liabilities calculation Ratio cagh (a) Account Receivable onet (6) Inventory (4) Total current assets = atbtc curodent liabilities. le cardent Ratio ca Tests of solvency Royalhe company cavalies company $15,000 s 30000 $ 451000 $6.000 $ 90,000 Si 5000 s 150000 T1000 100.000 $ 17,000 1.5 5-35 10) Determine the Debt-to-assets natio as shown below Formula Total liabilitig Debt Assets Total Assets 35000 calculation - soosnik Ratio boud current liabilities (0) Note payable (long term) b) Total liabilities (c=a+b) Total assets Call Debt- to - asset C38) Royale company cavalied company 100,000 $17,000 1701000 270000 52.000 810.000 267000 30-34 1019