Question

Problem 19-1 Use the financial statements of Heifer Sports Inc. to find the information below for Heifer. (Use 365 days a year. Round all answers to 2 decimal places except $ amounts.) $ 2017 5,780,000 3,062,000 384,500 Income Statement Sales Cost of foods sold Depreciation Selling & admin. expenses EBIT Interest expense Taxable income Тахе Net income 783,500 179,00 624,500 276,203 328.300 $ 2017 2016 40,000 582,000 432,100 $ 1,054,100 2,788,000 $ 3,842,100 $ 100,000 1.735.500 1,207,300 $ 3,042,869 7,140,000 $ 10,182,800 Balance Sheet, Year-End Assets Cash Accounts receivable Inventory Total current assets Fixed assets Total assets Liabilities and Stockholders' Equity Accounts payable Short-term debt Total current liabilities Long-term bonds Total liabilities Common stock Retained earnings Total stockholders' equity Total liabilities and stockholders' equity $ 309,200 500,000 817,200 1,688,600 $ 2,505,800 314,800 1,021,500 $ 1,336,300 $ 3,842,100 $ 1,248,000 1,534,300 $ 2,782,300 6,132,500 $ 8,914,800 $ 314,800 953,200 $ 1,268,000 $ 10,182,800 days a. Inventory turnover ratio in 2017 b. Debt/equity ratio in 2017 c. Cash flow from operating activities in 2017 d. Average collection period e. Asset turnover ratio f. Interest coverage ratio g. Operating profit margin h. Return on equity j. Compound leverage ratio k. Net cash provided by operating activities

Answer 1

Income Statement	2017
Sales	5,780,000
Cost of goods sold	3,062,000
Gross Profit	2,718,000
Depreciation	304,500
Selling & Admin expenses	1,630,000
EBIT	783,500
Interest expense	179,000
Taxable income	604,500
Taxes	276,200
Net Income	328,300
Balance sheet	2017	2016
Cash	40,000	100,000
Account receivable	582,000	1,735,500
Inventory	432,100	1,207,300
Total current assets	1,054,100	3,042,800
Fixed Assets	2,788,000	7,140,000
Total Assets	3,842,100	10,182,800
Liabilities & stockholders equity
Accounts payable	309,200	1,248,000
short term debt	508,000	1,534,300
Total current liabilities	817,200	2,782,300
Long term bond	1,688,600	6,132,500
Total liabilities	2,505,800	8,914,800
Common stock	314,800	314,800
Retained earnings	1,021,500	953,200
Total stockholders equity	1,336,300	1,268,000
Total liabilities & stockholders equity	3,842,100	10,182,800

Inventory Turnover ratio 2017	= Cost of goods sold / Average Inventories	306,000/((432,100+1,207,300)/2) =	3.74
Debt equity ratio 2017	= Total debt / Total stockholders equity	(1,688,600 + 508,000)/1,336,300 =	1.64
Cash flow from operating activities 2017	Cash flow from operating activities = Net Income + Depreciation – Increase in Accounts Receivable – Increase in Inventory + Increase in Accounts Payable	328,300+304,500-(40,000-100,000)-(432,100-1,207,300)+(1,248,000-309,200) =	1,622,700
Average collection period	= 365 / Receivable turnover ratio	365/4.99 =	73	Days
Asset turnover ratio	= Sales / Total Assets	5,780,000 / 3,842,100 =	1.50
Interest coverage ratio	= EBIT / Interest expense	783,500 / 179,000 =	4.38
Operating profit margin	= EBIT / Sales	783,500 / 5,780,000 =	13.56%
Return on equity	= Net income / Total stockholders equity	328,300 / 1,336,300 =	24.57%
compound leverage ratio	= (Taxable income / EBIT) X (Total assets / Equity)	(604,500/783,500) X (3,842,100 / 1,336,300) =	2.22
Receivable turnover ratio	= Sales / Average recievables	5,780,000/((582,000+1,735,500)/2) =	4.99
Note : Net cash provided by operating activities and Cash flow from operating activities are same things.