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    Financial Ratio Calculations for Fox Company, Inc

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    The following information is available for the Fox Company, Inc.:
    Fox Company, Inc
    Income Statement
    For the Year Ended December 31, 2005
    Sales $6,500,000
    Cost of goods sold 4,850,000
    Gross profit 1,650,000
    Operating expenses (780,000)
    Operating income 870,000
    Other expenses-interest expense (125,000)
    Income before income tax 745,000
    Income tax (268,200)
    Net income $476,800

    Statement of Retained Earnings
    For the Year Ended December 31, 2005

    Beginning retained earnings balance $950,000
    Net income 476,800
    Dividends (47,680)
    Endings retained earnings $1,379,120

    Balance Sheet
    December 31, 2005

    ASSETS:
    Current assets:
    Cash $126,000
    Accounts receivable 750,000
    Inventory 598,000
    Supplies 12,000
    Prepaid expenses 36,000
    Total current assets 1,522,000
    Property, plant, and equipment:
    Land 865,000
    Building 2,350,000
    Accumulated depreciation-building (360,000)
    Building, net of accumulated depreciation 1,990,000

    Total property, plant, and equipment 2,855,000

    LIABILITIES
    Current liabilities
    Accounts payable $550,000
    Current notes payable 65,000
    Total current liabilities 615,000
    Long-term liabilities:
    Long-term bonds payable 150,000
    Long-term bonds payable 1,350,000
    Total long-term liabilities 1,500,000
    Total liabilities 2,115,000

    EQUITY:
    Paid-in capital:
    Common stock, $5 par, 200,000 shares authorized,
    38,000 shares issued and outstanding 190,000
    Additional paid-in capital-common 692,880
    Total paid-in capital 882,880
    Retained earnings 1,379,120
    Total equity 2,262,000
    Total liabilities and equity $377,000

    Required: Assume the following:
    The company's assets totaled $4,290,000 at December 31, 2004.
    The company's accounts receivable totaled $720,000 at December 31, 2004.

    a. Calculate the following ratios for the company:

    1. The asset turnover ratio
    2. The receivables turnover ratio
    3. The average accounts receivable collection period in days
    4. The current ratio
    5. The quick ratio
    6. The times interest earned ratio
    b. Based on the ratios, what is your impression of the company? Explain your answer.

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    FOX COMPANY, INC.: FINANCIAL IMPRESSIONS

    FOX COMPANY INC.

    Financial Ratios for the year ended 2005

    1. Asset Turnover ratio = Sales/Total Assets
    Sales = 6500000
    Total Assets:
    Current Assets = 1522000
    Fixed Assets :
    Land 865000
    Building (net of dep.) 1990000
    Total fixed assets 2855000

    Total Assets : 4377000

    Asset turnover ratio 1.485035

    2. Receivable turnover ratio = Annual Credit sales/Accounts Receivable

    Annual sales ( credit sales) 6500000
    Accounts Receivable 750000

    Receivable turnover ratio 8.666667

    3. Average collection period = Accounts Receivable/ Credit sales per day
    = Accounts Receivable / ( Sales/365)

    = 42.11538

    days

    4. Current Ratio = current ...

    Solution Summary

    Financial ratio calculations for Fox Company, Inc are examined in the following solution.

    $2.19