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Cavern Gear, Inc: Income Statement and Balance Sheet

Cavern Gear, Inc.
2007 Income Statement

Net Sales $318,400
Less: Cost of goods sold 229,800
Less: Depreciation 9,100
Earnings before interest and taxes 79,500
Less: Interest paid 7,200
Taxable Income $72,300
Less: Taxes 25,000
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Net income $47,000
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Cavern Gear, Inc.
2006 and 2007 Balance Sheets

2006 2007 2006 2007

Cash $18,700 $24,200 Accounts payable $88,000 $67,900
Accounts Rec. 16,400 14,900 Long-term debt 94,800 89,600
Inventory 154,200 128,500 Common stock 57,500 60,000
Sub-total $189,300 $167,600 Retained earnings 33,500 71,900
Net Fixed assets 84,500 121,800 ------- -------
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Total $273,800 $289,400 Total $273,800 $289,400
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The par value of the common stock is $1 per share.

1. What is the cash coverage ratio for 2007?
2. What is the days' sales in receivables? (use 2007 values)
3. What is the return on equity? (use 2007 values)
4. What is the cash flow to stockholders for 2007?
5. What is the amount of the net cash from investment activity for 2007?
6. What amount should be included in the financial section of the 2007 statement of cash flows for dividends paid?
7. What is the price-sales ratio if the market price is $17.70 share?
8. What is the amount of dividends paid in 2007?
9. What is the quick ratio for 2007? (use 2007 values)
10. What is debt-equity ratio? (use 2007 value)

Solution Preview

Please see the attached document for a more in-depth explanation.

1. Cash coverage ratio for 2007:
Cash flow after taxes/Debt Payments 0.63
(Cash flow after tax=Net Income+Depreciation)

2. What is the days' sales in receivables? (use 2007 values)
Accounts receivable turnover 20.35
Sales/Average Receivables
Days sales in ...

Solution Summary

This solution calculates several variables including cash coverage ratio, return on equity, price-sales ratio, debt-equity ratio, and so forth.

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