11 Lifemark, which has been in operation for five years, currently has current liabilities of $50,000 and long term liabilities of $75,000. It also has $50,000 in common stock and $25,000 in retained earnings. Calculate Lifemarks debt to equity ratio. a. .67X b. 40X C. 1.67X d. 2.50X e. None of the above. The correct answer is 'c'.
Related questions
Use the balance sheets of Sando shown below to calculate thefollowing ratios for 2013 (round to the hundredths):
(a) Current ratio
(b) Acid-test ratio
(c) Debt to Equity ratio
| SANDO COMPANY Balance Sheets December 31, 2013 | |
Assets: | |
Cash | $ 43,000 |
Accounts receivable | 38,000 |
Merchandise inventory | 61,000 |
Prepaid insurance | 6,000 |
Long-term investments | 49,000 |
Plant assets (net) | 218,000 |
Total assets | $415,000 |
Liabilities and Equity: | |
Current liabilities | $ 62,000 |
Long-term liabilities | 45,000 |
Common stock | 150,000 |
Retained earnings | 158,000 |
Total liabilities and equity | $415,000 |
| Financial Information for Case9-1 | |||
| Industy Wide | |||
| Balance Sheets | |||
| Years Ended December 31, 2014and 2015 | |||
| 2015 | 2014 | ||
| Assets | |||
| Current Assets: | |||
| Cash | $ 30,000 | $ 25,000 | |
| Accounts receivable | 110,000 | 90,000 | |
| Inventories | 100,000 | 80,000 | |
| Total Current Assets | 240,000 | 195,000 | |
| Fixed Assets; | |||
| Plant and equipment | 250,000 | 220,000 | |
| Less accumulated depreciation | (100,000) | (65,000) | |
| Land | 50,000 | 50,000 | |
| Total Fixed Assets | 200,000 | 205,000 | |
| Total Assets | $ 440,000 | $ 400,000 | |
| Liabilities and Equity | |||
| Current Liabilities: | |||
| Accounts payable | $ 58,000 | $ 50,000 | |
| Notes payable-due within one year | 50,000 | 50,000 | |
| Accrued liabilities | - | - | |
| Total Current Liabilities | 108,000 | 100,000 | |
| Long Term Liabilities | 32,000 | 20,000 | |
| Total Liabilities | 140,000 | 120,000 | |
| Stockholders' Equity: | |||
| Common stock | 100,000 | 100,000 | |
| Retained earnings | 200,000 | 180,000 | |
| Total Stockholders' Equity | 300,000 | 280,000 | |
| Total Liabilities and Equty | $ 440,000 | $ 400,000 | |
| Industry Wide | |||
| Income Statement | |||
| Years Ended December 31, 2014and 2015 | |||
| Revenues | $ 1,100,000 | $ 1,000,000 | |
| Cost of goods sold | (700,000) | (650,000) | |
| Gross margin | 400,000 | 350,000 | |
| Operating expenses | (275,000) | (255,000) | |
| Operating income | 125,000 | 95,000 | |
| Interest expense | (15,000) | (15,000) | |
| Income before taxes | 110,000 | 80,000 | |
| Income taxes | (44,000) | (32,000) | |
| Net income | $ 66,000 | $ 48,000 | |
| Financial Information for Case9-1 | |||
| Industy Wide | |||
| Balance Sheets | |||
| Years Ended December 31, 2014and 2015 | |||
| 2015 | 2014 | ||
| Assets | |||
| Current Assets: | |||
| Cash | $ 30,000 | $ 25,000 | |
| Accounts receivable | 110,000 | 90,000 | |
| Inventories | 100,000 | 80,000 | |
| Total Current Assets | 240,000 | 195,000 | |
| Fixed Assets; | |||
| Plant and equipment | 250,000 | 220,000 | |
| Less accumulated depreciation | (100,000) | (65,000) | |
| Land | 50,000 | 50,000 | |
| Total Fixed Assets | 200,000 | 205,000 | |
| Total Assets | $ 440,000 | $ 400,000 | |
| Liabilities and Equity | |||
| Current Liabilities: | |||
| Accounts payable | $ 58,000 | $ 50,000 | |
| Notes payable-due within one year | 50,000 | 50,000 | |
| Accrued liabilities | - | - | |
| Total Current Liabilities | 108,000 | 100,000 | |
| Long Term Liabilities | 32,000 | 20,000 | |
| Total Liabilities | 140,000 | 120,000 | |
| Stockholders' Equity: | |||
| Common stock | 100,000 | 100,000 | |
| Retained earnings | 200,000 | 180,000 | |
| Total Stockholders' Equity | 300,000 | 280,000 | |
| Total Liabilities and Equty | $ 440,000 | $ 400,000 | |
| Industry Wide | |||
| Income Statement | |||
| Years Ended December 31, 2014and 2015 | |||
| Revenues | $ 1,100,000 | $ 1,000,000 | |
| Cost of goods sold | (700,000) | (650,000) | |
| Gross margin | 400,000 | 350,000 | |
| Operating expenses | (275,000) | (255,000) | |
| Operating income | 125,000 | 95,000 | |
| Interest expense | (15,000) | (15,000) | |
| Income before taxes | 110,000 | 80,000 | |
| Income taxes | (44,000) | (32,000) | |
| Net income | $ 66,000 | $ 48,000 | |
1. Calculate the current ratio and average collection period foraccounts receivable, inventory turnover, gross margin percentage,and return on equity for 2014 and 2015 for the JordanCorporation.
2. Calculate the current ratio and average collection period foraccounts receivable, inventory turnover, gross margin percentage,and return on equity for the Industry.
3. Compare the performance of the Jordan Corporation between2014 and 2015 and comment on the trend of each ratio.
4. Compare the performance of the Jordan Corporation in 2015 tothe industry averages and comment on each.
20. Brigman Inc. has the following financial statementinformation for 2009 and 2008:
Balance Sheet Information: | 2009 | 2008 | |
Assets: | |||
Cash | $ 5,000 | $ 12,000 | |
Accounts receivable | 14,000 | 10,000 | |
Inventory | 35,000 | 30,000 | |
Total current assets | $ 54,000 | $ 52,000 | |
Property and Equipment (net) | 50,000 | 45,000 | |
Total assets | $104,000 | $ 97,000 | |
Liabilities: | |||
Accounts payable | $ 9,000 | $ 3,000 | |
Salaries payable | 3,000 | 1,000 | |
Total current liabilities | $ 12,000 | $ 4,000 | |
Notes payable | 20,000 | 25,000 | |
Total liabilities | $ 32,000 | $ 29,000 | |
Stockholders' Equity: | |||
Common stock | $ 40,000 | $ 40,000 | |
Retained earnings | 32,000 | 28,000 | |
Total stockholders' equity | $ 72,000 | $ 68,000 | |
Total liabilities and stockholders' equity | $104,000 | $ 97,000 | |
Income Statement Information: | |||
Net sales | $650,000 | $556,000 | |
Cost of goods sold | 380,000 | 290,000 | |
Gross profit | $270,000 | $266,000 | |
Selling and administrative expenses | 75,000 | 70,000 | |
Interest expense | 4,000 | 10,000 | |
Income before income taxes | $191,000 | $186,000 | |
Income tax expense | 57,300 | 56,300 | |
Net income | $133,700 | $129,700 | |
Other Information: | |||
Number of common shares outstanding | 4,000 | 4,000 | |
Dividends paid | $ 0 | $ 0 | |
Market price per share (12/31) | $40 | $30 | |
Income tax rate | 30% | 30.27% |
Required: Compute the following ratios for the year endingDecember 31, 2009: (round to two decimal places)
A. | Inventory turnover |
B. | Return on assets (ROA) ratio |
C. | Asset turnover ratio |
D. | Earnings per share (EPS) |
E. | Price earnings (P/E) ratio. |
F. Return on common stockholdersâ equity
G. Current ratio
H. Quick ratio
I. Debt-to-equity ratio
