Question

Problem 1: Ratios. (3 points each, 24 points total) Use the following to answer the questions. Rusco Company Comparative Balance Sheet As of July 31 (In 000) This Year Assets Current Assets: Cash & Cash Equivalents $ 8 A/R 120 Inventory 140 Prepaid Expenses Last Year Change $ 21 $ 13 90 9 273 Total Current Assets Long-term Investments PP&E Accum, Depr. PP&E 20 50 430 (60) 200 70 300 (50) 130 10 Total Assets $ 693 $ 520 $ 173 Liabilities & Stockholders' Equity Current Liabilities A/P $ $ 60 Accrued Liabilities Income Tax Payable 123 8 20 12 Total Current Liabilities Bonds Payable 151 89 70 -0- 221 89 132 Total Liabilities Stockholders' Equity Common Stock Retained Earnings 346 366 106 85 20 21 Total Liabilities & Stockholders' Equity $ 693 $ 520 $ 173 Rusco Company Income Statement For this Year Ended July 31 (In 000) Additional Information: Sales Cost of Goods Sold $ 500 300 A. Equipment with an original cost of $20 was sold for $8 Gross Margin Selling and Admin Expenses 200 158 B. Long-term investments were sold for $30 42 C. The Company did not retire any bonds payable or repurchase any common stock. Nonoperating Income Gain on Sale of Investments Loss on Sale of Equipment S 10 (2) 8 D. Last year the company had 100,000 shares outstanding and in the current year they have 106,000 shares outstanding. Income before Tax Тах Net Income $ 30

Using the data for Rusco Company, prepare the following ratios/ numbers for the current year. Show formula and work.

A.) what is the cash ratio?

B.) What is the A/R and Inventory turnover?

C.) What is the Earning Per Share for current year?

D.) Purchases?

Answer 1

A.) Cash ratio = 0.53 or 5.30% (rounding to 2 decimal places)

B.) A/R Turnover = 5.0

Inventory turnover = 2.61

C.) Earning Per Share for current year = $0.29

D.) Purchases = $350,000

Notes

1) Formula to calculate Cash Ratio = Cash & cash equivalents/Current Liabilities = 8/151 = 0.5298 or 5.298%

2) AR Turnover = Net Sales/Average Accounts Receivables = 500/ 100= 5.00

Average Accounts Receivables = (Beginning Accounts Receivables + Ending Accounts Receivables )/2 = (80+120)/2 = 100

Inventory Turnover = Cost of Goods Sold/Average Inventory = 300/115 = 2.60869

Average Inventory = (Beginning Inventory + Ending Inventory)/2 = (140+90)/2 = 115

3) Earnings per share = Net Income/Weighted Average shares outstanding = 30000/103000= $0.29

Weighted Average shares outstanding = (100000+106000)/2 = 103000

4) We know that

Cost of Goods Sold = Opening Inventory + Purchases - Closing Inventory

300 = 90 + Purchases - 140. Hence Purchases = 300+140-90 = $350