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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

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