Expert answer:Financial ration

Expert answer:prob 1As loan analyst for Utrillo Bank, you have been presented the following information. Toulouse Co. Lautrec Co. Assets Cash $126,400 $329,200 Receivables 229,800 301,400 Inventories 579,100 515,100 Total current assets 935,300 1,145,700 Other assets 505,200 616,200 Total assets $1,440,500 $1,761,900 Liabilities and Stockholders’ Equity Current liabilities $308,700 $349,200 Long-term liabilities 402,100 505,200 Capital stock and retained earnings 729,700 907,500 Total liabilities and stockholders’ equity $1,440,500 $1,761,900 Annual sales $931,600 $1,496,600 Rate of gross profit on sales 25 % 35 % Each of these companies has requested a loan of $50,180 for 6 months with no collateral offered. Because your bank has reached its quota for loans of this type, only one of these requests is to be granted. Compute the various ratios for each company. (Round answer to 2 decimal places, e.g. 2.25.) Current ratio Acid test radio Accounts receivable turnover Cash to current liabilities prob 2 Bradburn Corporation was formed 5 years ago through a public subscription of common stock. Daniel Brown, who owns 15% of the common stock, was one of the organizers of Bradburn and is its current president. The company has been successful, but it currently is experiencing a shortage of funds. On June 10, 2015, Daniel Brown approached the Topeka National Bank, asking for a 24-month extension on two $35,780 notes, which are due on June 30, 2015, and September 30, 2015. Another note of $7,050 is due on March 31, 2016, but he expects no difficulty in paying this note on its due date. Brown explained that Bradburn’s cash flow problems are due primarily to the company’s desire to finance a $317,800 plant expansion over the next 2 fiscal years through internally generated funds. The commercial loan officer of Topeka National Bank requested financial reports for the last 2 fiscal years. BRADBURN CORPORATION BALANCE SHEET MARCH 31 Assets 2015 2014 Cash $18,930 $12,630 Notes receivable 149,400 132,480 Accounts receivable (net) 133,880 126,270 Inventories (at cost) 107,700 51,530 Plant & equipment (net of depreciation) 1,461,400 1,431,000 Total assets $1,871,310 $1,753,910 Liabilities and Owners’ Equity Accounts payable $80,670 $91,740 Notes payable 78,610 62,000 Accrued liabilities 27,094 17,880 Common stock (130,000 shares, $10 par) 1,300,000 1,300,000 Retained earningsa 384,936 282,290 Total liabilities and stockholders’ equity $1,871,310 $1,753,910 aCash dividends were paid at the rate of $1 per share in fiscal year 2014 and $2 per share in fiscal year 2015. BRADBURN CORPORATION INCOME STATEMENT FOR THE FISCAL YEARS ENDED MARCH 31 2015 2014 Sales revenue $3,013,900 $2,706,900 Cost of goods solda 1,547,300 1,433,400 Gross margin 1,466,600 1,273,500 Operating expenses 862,190 785,700 Income before income taxes 604,410 487,800 Income taxes (40%) 241,764 195,120 Net income $362,646 $292,680 aDepreciation charges on the plant and equipment of $110,400 and $112,500 for fiscal years ended March 31, 2014 and 2015, respectively, are included in cost of goods sold. (a) Compute the following items for Bradburn Corporation. (Round answer to 2 decimal places, e.g. 2.25.) (1) Current ratio for fiscal years 2014 and 2015. (2) Acid-test (quick) ratio for fiscal years 2014 and 2015. (3) Inventory turnover for fiscal year 2015. (4) Return on assets for fiscal years 2014 and 2015. (Assume total assets were $1,691,600 at 3/31/13.) (5) Percentage change in sales, cost of goods sold, gross margin, and net income after taxes from fiscal year 2014 to 2015. 2014 2015 (1) Current ratio :1 :1 (2) Acid-test (quick) ratio :1 :1 (3) Inventory turnover times (4) Return on assets % % (5) Percent Changes Percent Increase Sales revenue % Cost of goods sold % Gross margin % Net income after taxes %
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Exercise 24-4
Your answer is partially correct. Try again.
As loan analyst for Utrillo Bank, you have been presented the following information.
Toulouse Co.
Lautrec Co.
$126,400
$329,200
Receivables
229,800
301,400
Inventories
579,100
515,100
935,300
1,145,700
505,200
616,200
$1,440,500
$1,761,900
$308,700
$349,200
Long-term liabilities
402,100
505,200
Capital stock and retained earnings
729,700
907,500
$1,440,500
$1,761,900
$931,600
$1,496,600
Assets
Cash
Total current assets
Other assets
Total assets
Liabilities and Stockholders’ Equity
Current liabilities
Total liabilities and stockholders’
equity
Annual sales
Rate of gross profit on sales
25 %
35 %
Each of these companies has requested a loan of $50,180 for 6 months with no collateral offered.
Because your bank has reached its quota for loans of this type, only one of these requests is to be
granted.
Compute the various ratios for each company. (Round answer to 2 decimal places, e.g. 2.25.)
Current ratio
Acid test radio
Accounts receivable turnover
Cash to current liabilities
Bradburn Corporation was formed 5 years ago through a public subscription of common stock. Daniel
Brown, who owns 15% of the common stock, was one of the organizers of Bradburn and is its current
president. The company has been successful, but it currently is experiencing a shortage of funds. On
June 10, 2015, Daniel Brown approached the Topeka National Bank, asking for a 24-month extension
on two $35,780 notes, which are due on June 30, 2015, and September 30, 2015. Another note of
$7,050 is due on March 31, 2016, but he expects no difficulty in paying this note on its due date.
Brown explained that Bradburn’s cash flow problems are due primarily to the company’s desire to
finance a $317,800 plant expansion over the next 2 fiscal years through internally generated funds.
The commercial loan officer of Topeka National Bank requested financial reports for the last 2 fiscal
years.
BRADBURN CORPORATION
BALANCE SHEET
MARCH 31
Assets
2015
2014
Cash
$18,930
$12,630
Notes receivable
149,400
132,480
Accounts receivable (net)
133,880
126,270
Inventories (at cost)
107,700
51,530
Plant & equipment (net of depreciation)
1,461,400
1,431,000
$1,871,310
$1,753,910
$80,670
$91,740
Notes payable
78,610
62,000
Accrued liabilities
27,094
17,880
1,300,000
1,300,000
384,936
282,290
$1,871,310
$1,753,910
Total assets
Liabilities and Owners’ Equity
Accounts payable
Common stock (130,000 shares, $10 par)
Retained earningsa
Total liabilities and stockholders’ equity
aCash
dividends were paid at the rate of $1 per share in fiscal year 2014 and $2 per share in fiscal year
2015.
BRADBURN CORPORATION
INCOME STATEMENT
FOR THE FISCAL YEARS ENDED MARCH 31
2015
Sales revenue
2014
$3,013,900
$2,706,900
1,547,300
1,433,400
1,466,600
1,273,500
Operating expenses
862,190
785,700
Income before income taxes
604,410
487,800
Income taxes (40%)
241,764
195,120
$362,646
$292,680
Cost of goods
solda
Gross margin
Net income
aDepreciation
charges on the plant and equipment of $110,400 and $112,500 for fiscal years ended March
31, 2014 and 2015, respectively, are included in cost of goods sold.
(a)
Compute the following items for Bradburn Corporation. (Round answer to 2 decimal places, e.g.
2.25.)
(1)
(2)
(3)
(4)
Current ratio for fiscal years 2014 and 2015.
Acid-test (quick) ratio for fiscal years 2014 and 2015.
Inventory turnover for fiscal year 2015.
Return on assets for fiscal years 2014 and 2015. (Assume total assets were $1,691,600 at
3/31/13.)
(5) Percentage change in sales, cost of goods sold, gross margin, and net income after taxes from
fiscal year 2014 to 2015.
2014
2015
(1) Current ratio
:1
:1
(2) Acid-test (quick) ratio
:1
:1
(3) Inventory turnover
(4) Return on assets
(5) Percent Changes
times
%
Percent Increase
Sales revenue
%
Cost of goods sold
%
Gross margin
%
Net income after taxes
%
%
…
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