Question

Use the common-size financial statements found here:

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Data Table

Common-Size Balance Sheet		2016
Cash and marketable securities	$	500	1.5	%
Accounts receivable		6,000	18.2
Inventory		9,500	28.8
Total current assets	$	16,000	48.5	%
Net property, plant, and equipment		17,000	51.5
Total assets	$	33,000	100.0	%
Accounts payable	$	7,200	21.8	%
Short-term notes		6,800	20.6
Total current liabilities	$	14,000	42.4	%
Long-term liabilities		7,000	21.2
Total liabilities	$	21,000	63.6	%
Total common shareholders’ equity		12,000	36.4
Total liabilities and shareholders’ equity	$	33,000	100.0	%

Common-Size Income Statement		2016
Revenues	$	30,000	100.0	%
Cost of goods sold		(20,000)	66.7
Gross profit	$	10,000	33.3	%
Operating expenses		(8,000)	26.7
Net operating income	$	2,000	6.7	%
Interest expense		(900)	3.0
Earnings before taxes	$	1,100	3.7	%
Income taxes		(400)	1.3
Net income	$	700	2.3	%

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to respond to your boss' request that you write up your assessment of the firm's financial condition. Specifically, write up a brief narrative that responds to the following questions:

a. How much cash does Patterson have on hand relative to its total assets?

b. What proportion of Patterson's assets has the firm financed using short-term debt? Long-term debt?

c. What percent of Patterson's revenues does the firm have left over after paying all of its expenses (including taxes)?

d. Describe the relative importance of Patterson's major expense categories, including cost of goods sold, operating expenses, and interest expenses.

a. How much cash does Patterson have on hand relative to its total assets?

The cash Patterson has on hand relative to its total assets is

nothing %.

(Round to one decimal place.)

Answer 1

The common size statements found is correct as per question given
a)=500/33000=1.5%
b)short term debt=6800/33000=20.6%
long term debt=7000/33000=21.2%
c)Here there are asking net income % and it is =(700/30000)=2.3%
d)Cost of good sold is 66.7% of revenues, operating expenses is 26.7% of revenues and interest expense is just 3% of revenues