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ACC205 week 5 assignment

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Question;eek Five Exercise Assignment;Financial Ratios;1. Liquidity ratios. Edison, Stagg, and Thornton have the following financial information at the close of business on July 10;Edison Stagg Thornton;Cash $6,000 $5,000 $4,000;Short-term investments 3,000 2,500 2,000;Accounts receivable 2,000 2,500 3,000;Inventory 1,000 2,500 4,000;Prepaid expenses 800 800 800;Accounts payable 200 200 200;Notes payable: short-term 3,100 3,100 3,100;Accrued payables 300 300 300;Long-term liabilities 3,800 3,800 3,800;a. Compute the current and quick ratios for each of the three companies. (Round calculations to two decimal places.) Which firm is the most liquid? Why?;2. Computation and evaluation of activity ratios. The following data relate to Alaska Products, Inc;20X5 20X4;Net credit sales $832,000 $760,000;Cost of goods sold 530,000 400,000;Cash, Dec. 31 125,000 110,000;Average Accounts receivable 205,000 156,000;Average Inventory 70,000 50,000;Accounts payable, Dec. 31 115,000 108,000;Instructions;a. Compute the accounts receivable and inventory turnover ratios for 20X5. Alaska rounds all calculations to two decimal places.;3. Profitability ratios, trading on the equity. Digital Relay has both preferred and common stock outstanding. The com?pany reported the following information for 20X7;Net sales $1,750,000;Interest expense 120,000;Income tax expense 80,000;Preferred dividends 25,000;Net income 130,000;Average assets 1,200,000;Average common stockholders' equity 500,000;a. Compute the profit margin on sales ratio, the return on equity and the return on assets, rounding calculations to two decimal places.;b. Does the firm have positive or negative financial leverage? Briefly ex?plain.;4. Horizontal analysis. Mary Lynn Corporation has been operating for several years. Selected data from the 20X1 and 20X2 financial statements follow.;20X2 20X1;Current Assets $86,000 $80,000;Property, Plant, and Equipment (net) 99,000 90,000;Intangibles 25,000 50,000;Current Liabilities 40,800 48,000;Long-Term Liabilities 153,000 160,000;Stockholders? Equity 16,200 12,000;Net Sales 500,000 500,000;Cost of Goods Sold 322,500 350,000;Operating Expenses 93,500 85,000;a. Prepare a horizontal analysis for 20X1 and 20X2. Briefly comment on the results of your work.;5.Vertical analysis. Mary Lynn Corporation has been operating for several years. Selected data from the 20X1 and 20X2 financial statements follow.;20X2 20X1;Current Assets $86,000 $80,000;Property, Plant, and Equipment (net) 99,000 80,000;Intangibles 25,000 50,000;Current Liabilities 40,800 48,000;Long-Term Liabilities 153,000 150,000;Stockholders? Equity 16,200 12,000;Net Sales 500,000 500,000;Cost of Goods Sold 322,500 350,000;Operating Expenses 93,500 85,000;a. Prepare a vertical analysis for 20X1 and 20X2. Briefly comment on the results of your work.;6. Ratio computation. The financial statements of the Lone Pine Company follow.;LONE PINE COMPANY;Comparative Balance Sheets;December 31, 20X2 and 20X1 ($000 Omitted);20X2 20X1;Assets;Current Assets;Cash and Short-Term Investments $400 $600;Accounts Receivable (net) 3,000 2,400;Inventories 3,000 2,300;Total Current Assets $6,400 $5,300;Property, Plant, and Equipment;Land $1,700 $500;Buildings and Equipment (net) 1,500 1,000;Total Property, Plant, and Equipment $3,200 $1,500;Total Assets $9,600 $6,800;Liabilities and Stockholders? Equity;Current Liabilities;Accounts Payable $2,800 $1,700;Notes Payable 1,100 1,900;Total Current Liabilities $3,900 $3,600;Long-Term Liabilities;Bonds Payable 4,100 2,100;Total Liabilities $8,000 $5,700;Stockholders? Equity;Common Stock $200 $200;Retained Earnings 1,400 900;Total Stockholders? Equity $1,600 $1,100;Total Liabilities and Stockholders? Equity $9,600 $6,800;LONE PINE COMPANY;Statement of Income and Retained Earnings;For the Year Ending December 31,20X2 ($000 Omitted);Net Sales* $36,000;Less: Cost of Goods Sold $20,000;Selling Expense 6,000;Administrative Expense 4,000;Interest Expense 400;Income Tax Expense 2,000 32,400;Net Income $3,600;Retained Earnings, Jan. 1 900;Ending Retained Earnings $4,500;Cash Dividends Declared and Paid 3,100;Retained Earnings, Dec. 31 $1,400;*All sales are on account.;Instructions;Compute the following items for Lone Pine Company for 20X2, rounding all calcu?lations to two decimal places when necessary;a. Quick ratio;b. Current ratio;c. Inventory-turnover ratio;d. Accounts-receivable-turnover ratio;e. Return-on-assets ratio;f. Net-profit-margin ratio;g. Return-on-common-stockholders? equity;h. Debt-to-total assets;i. Number of times that interest is earned

 

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