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    Finance Questions

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    1. The Sally Corporation's income statement is given below.
    Sally Corporation
    Sales.......................................$250,000
    Cost of Goods Sold....................... 145,000
    Gross Profit.................................105,000
    Fixed Charges (other than interest)...... 25,000
    Income before interest and taxes...........80,000
    Interest.........................................20,000
    Income before taxes......................... 60,000
    Taxes (35%)................................... 21,000
    Income after taxes............................$39,000
    a. What is Sally's Time-Interest-Earned Ratio?
    b. What is the Fixed-Charge-Coverage Ratio? Go to investopedia.com. Formula is given.
    c. What is the Net Profit Margin?
    d. What is the Gross Profit Margin?

    2. Given the following information, prepare, in good form, an income statement for the Dental Drilling Company as of December 31, 2003.

    Selling and administrative expense $ 60,000
    Depreciation expense 70,000
    Sales 470,000
    Interest expense 40,000
    Cost of goods sold 140,000
    Taxes 45,000

    3. Database Systems is considering expansion into a new product line. Assets to support expansion will cost $500,000. It is estimated that Database can generate $1,200,000 in annual sales, with a 6 percent profit margin. What would net income and return on assets (investment) be for the year?

    4. For ABC Corporation as of December 31, 2002 prepare a Balance Sheet in proper order based on the following information.

    Arrange the following items in proper balance sheet presentation.Accumulated depreciation $300,000Retained earnings 96,000Cash 10,000Bonds payable 136,000Accounts receivable 48,000Plant and equipment?original cost 680,000Accounts payable 35,000Allowance for bad debts 6,000Common stock $1 par, 100,000 shares outstanding 100,000Inventory 66,000Preferred stock, $50 par, 1,000 shares outstanding 50,000Marketable securities 20,000Investments 20,000Notes payable 33,000Capital paid in excess of par (common stock) 88,000

    5. The cash account for Presley Corporation shows the following for the year ended December 31,2006.

    Beginning cash balance . . . . . . . . . . $ ?
    Cash receipts during year from:
    Services . . . . . . . . . . . . . . . . . . . . . 2,214,000
    Investments by owners . . . . . . . . . 93,000
    Sale of land . . . . . . . . . . . . . . . . . . 194,000
    Cash payments during year for:
    Operating expenses . . . . . . . . . . . . 1,735,000
    Taxes . . . . . . . . . . . . . . . . . . . . . . 207,000
    Purchase of building . . . . . . . . . . . 352,000
    Distributions to owners . . . . . . . . . 68,000
    Ending cash balance . . . . . . . . . . . . . 815,000

    Required:
    Prepare a statement of cash flows for Presley Corporation for the year ended December 31,2006.

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    https://brainmass.com/business/finance/195840

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    FINANCE 324

    You need to show your working for your answers.
    1. The Sally Corporation's income statement is given below.
    Sally Corporation
    Sales.......................................$250,000
    Cost of Goods Sold....................... 145,000
    Gross Profit.................................105,000
    Fixed Charges (other than interest)...... 25,000
    Income before interest and taxes...........80,000
    Interest.........................................20,000
    Income before taxes......................... 60,000
    Taxes (35%)................................... 21,000
    Income after taxes............................$39,000
    a. What is Sally's Time-Interest-Earned Ratio?
    Times Interest Earned Ratio = Income before interest and taxes/Interest
    Times Interest Earned Ratio = 80,000/20,000=4 x
    b. What is the Fixed-Charge-Coverage Ratio? Go to investopedia.com. Formula is given.
    Fixed Charge Coverage Ratio = (Income before interest and taxes +Fixed Charge)/(Fixed Charge +interest)
    Fixed Charge Coverage Ratio = (80,000+25,000)/(25,000+20,000) = 2.33x
    c. What is the Net Profit Margin?
    Net Profit Margin = Income After Taxes/Sales
    Net Profit Margin = 39,000/250,000=15.6%
    d. What is the Gross Profit Margin?
    Gross Profit Margin = Gross Profit/Sales = 105,000/250,000=42%
    2. Given the following information, prepare, in good form, an income statement for the Dental Drilling Company as of December 31, 2003.

    Selling and administrative expense $ 60,000
    Depreciation expense 70,000
    Sales 470,000
    Interest expense 40,000
    Cost of goods sold 140,000
    Taxes 45,000

    Dental Drilling Company
    Income Statement
    For year ended Dec 31, ...

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