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    Delta manufacturing - Balance Sheet

    Cash & Marketable Securities $225,000
    Account Receivables $890,000
    Inventories (lower of cost or market $930,000
    Prepaid Expenses $10,150
    Accumulated Tax Prepayment $12,000
    Current Assets $2,067,150
    Fixed Assets at cost $2,500,000
    Less: Accumulated Depreciation $700,000
    Next Fixed Asset $1,800,000
    Investment - Long Term $35,000
    Good Will $100,000
    Total Assets $4,002,150

    Bank Loans and Notes Payable $448,500
    Accounts Payable $148,000
    Accurred Taxes $36,000
    Other Accurred Liabilities $195,500
    Current Liabilities $828,000
    Long Term Debt $1,200,000
    Common Stock, $1 per value $700,000
    Additional Paid-in Capital $174,150
    Retained Earnings $1,100,000
    Total Net Worth (Capital) $1,974,150
    Total Liabilities and Net Worth $4,002,150

    Delta manufacturing Income Statement

    Net Sales $5,200,000
    Less: Cost of Good Sold $4,576,000
    Gross Profit $624,000
    Selling, General and Administrative Expenses $750,000
    Depreciation $95,000
    Interest Expense $75,000
    Earning Before Taxes $(296,000)
    Income taxes $-
    Earning After Taxes $(296,000)
    Cash Dividends $-
    Increase (decrease) in Retained Earnings $(296,000)

    What are the following financial ratios?
    a. Gross Profit margin
    b. Net Profit Margin
    c. Debt to Equity
    d. Asset Turnover
    e. Inventory Turnover (365 days)
    f. Return on Investment
    g. Average Collection Period (360) days
    h. Return on Equity

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    Solution Preview

    a. Gross Profit margin = Gross Profit/Sales = 624,000/5,200,000=12.00%
    b. Net Profit Margin = Net profit/Sales = -296,000/5,200,000=-5.69%
    c. Debt to Equity = Total Liabilities/Total ...

    Solution Summary

    The solution explains how to calculate the following ratios - Gross Profit margin, Net Profit Margin, Debt to Equity, Asset Turnover, Inventory Turnover (365 days), Return on Investment, Average Collection Period (360) days and Return on Equity