Homework Answers
| Kouris | Brittania | |||||||||
| (a) | Current ratio:- | |||||||||
| a. | Current Assets | $ 4,679.9 | $ 80.7 | |||||||
| b. | Current Liabilities | $ 2,015.2 | $ 16.3 | |||||||
| Ratio (a/b) | $ 2.32 | times | 4.95 | times | ||||||
| (b) | Acid Test Ratio:- | |||||||||
| a. | Quick Assets | |||||||||
| Total current assets- Inventory | 4679.9-1514.9 | = | $ 3,165.0 | 80.7-27.2 | = | $ 53.5 | ||||
| b. | Current Liabilities | $ 2,015.2 | $ 16.3 | |||||||
| Ratio (a/b) | 1.57 | times | 3.28 | times | ||||||
| (c) | Accounts Receivable turnover :- | |||||||||
| a. | Net Credit Sales | $ 10,697.0 | $ 133.5 | |||||||
| b. | Average Accounts Receivable | |||||||||
| opening + closing | 1804.1+2101.1 | = | $ 1,952.6 | 14.7+15.5 | = | $ 15.1 | ||||
| 2 | 2 | 2 | ||||||||
| Ratio (a/b) | 5.48 | times | 8.84 | times | ||||||
| (d) | Inventory turnover:- | |||||||||
| a. | Cost of goods sold | $ 6,313.6 | $ 87.3 | |||||||
| b. | Average Inventory | |||||||||
| opening + closing | 1373.8+1514.9 | = | $ 1,444.4 | 28.4+27.2 | = | $ 27.8 | ||||
| 2 | 2 | 2 | ||||||||
| Ratio (a/b) | 4.37 | times | 3.14 | times | ||||||
| ( e) | Days' Sales in Inventory:- | |||||||||
| a. | Number of Days in year | 365 | 365 | |||||||
| b. | Inventory turnover ratio | 4.37 | times | 3.14 | times | |||||
| Ratio (a/b) | 83.50 | days | 116.23 | days | ||||||
| (f) | Days Sales uncollected:- | |||||||||
| a. | Number of Days in year | 365 | 365 | |||||||
| b. | Accounts Receivable turnover ratio | 5.48 | times | 8.84 | times | |||||
| Ratio (a/b) | 66.63 | days | 41.28 | days | ||||||
| (g) | Profit Margin Ratio:- | |||||||||
| a. | Net Income before effect of accounting change | $ 740.1 | $ 5.2 | |||||||
| b. | Net Sales | $ 10,697.0 | $ 133.5 | |||||||
| Ratio (a/b) | 6.92% | 3.90% | ||||||||
| (h) | Return on Total Assets Ratio:- | |||||||||
| a. | Net Income before effect of accounting change | $ 740.1 | $ 5.20 | |||||||
| b. | Interest Expense (1-tax rate) | 42.9 * (1- (382.9/1123)) | $ 28.3 | 0.1* (1- (3.9/9.1)) | $ 0.06 | |||||
| c | Net income + Interest Expense (1-tax rate) | $ 768.4 | $ 5.26 | |||||||
| b. | Average Total assets | |||||||||
| opening + closing | 6440+6713.9 | = | $ 6,577.0 | 78+87.5 | = | $ 83 | ||||
| 2 | 2 | 2 | ||||||||
| Ratio (a/b *100) | 11.68% | 6.35% | ||||||||
| (h) | Return on common stockholders' equity:- | |||||||||
| a. | Net Income | $ 474 | $ 5.2 | |||||||
| b. | Common Stockholders' Equity | |||||||||
| opening + closing | 3839+3990.7 | = | $ 3,915 | 63.2+68.7 | = | $ 66.0 | ||||
| 2 | 2 | 2 | ||||||||
| Ratio (a/b *100) | 12.11% | 7.88% | ||||||||
| Brittania Company - better short term credit risk | |||
| Kouris Company - better profitability raios | |||
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