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Home / Questions / EXERCISE 15–6 Selected Financial Ratios LO3 LO4 Recent financial statements for Madison C...

EXERCISE 15–6 Selected Financial Ratios LO3 LO4 Recent financial statements for Madison Company follow Cash

EXERCISE 15–6 Selected Financial Ratios [LO3, LO4]

Recent financial statements for Madison Company follow:

 

 

 

 

 

 

 

 

Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

 

 

$     21,000

Accounts receivable, net . . . . . . . . . . . . . . .

 

 

160,000

Merchandise inventory . . . . . . . . . . . . . . . .

 

 

300,000

Prepaid expenses . . . . . . . . . . . . . . . . . . . .

 

 

9,000

Total current assets  . . . . . . . . . . . . . . . . . . . .

 

 

490,000

Plant and equipment, net . . . . . . . . . . . . . . . .

 

 

810,000

Total assets  . . . . . . . . . . . . . . . . . . . . . . . . . .

 

 

$1,300,000

Liabilities and Stockholders’ Equity

Liabilities:

Current liabilities . . . . . . . . . . . . . . . . . . . . .

 

 

 

 

$  200,000

Bonds payable, 10%  . . . . . . . . . . . . . . . . . .

 

 

300,000

Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . Stockholders’ equity:

Common stock, $5 par value . . . . . . . . . . .

 

 

$100,000

 

500,000

Retained earnings  . . . . . . . . . . . . . . . . . . .

700,000

 

 

Total stockholders’ equity . . . . . . . . . . . . . . . .

 

 

800,000

Total liabilities and stockholders’ equity . . . . .

 

 

$1,300,000

 

 

 

 

For the Year Ended June 30

 

Sales  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$2,100,000

Cost of goods sold . . . . . . . . . . . . . . . . . . . .

1,260,000

Gross margin  . . . . . . . . . . . . . . . . . . . . . . . .

840,000

Selling and administrative expenses  . . . . . .

660,000

Net operating income . . . . . . . . . . . . . . . . . .

180,000

Interest expense . . . . . . . . . . . . . . . . . . . . . .

30,000

Net income before taxes  . . . . . . . . . . . . . . .

150,000

Income taxes  . . . . . . . . . . . . . . . . . . . . . . . .

45,000

Net income . . . . . . . . . . . . . . . . . . . . . . . . . .

$  105,000

 

Account balances at the beginning of the company’s fiscal year were: accounts receivable,

$140,000; and inventory, $260,000. All sales were on account.

Required:

Compute financial ratios as follows:

1.       Gross margin percentage.

2.       Current ratio.

3.       Acid-test ratio.

4.       Average collection period.

5.       Average sale period.

6.       Debt-to-equity ratio.

7.       Times interest earned.

8.       Book value per share.

Jun 27 2020 View more View Less

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