Share
Explore BrainMass

Financial Ratio Calculations for Fox Company, Inc

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.

Attachments

Solution Preview

Please refer to the attached files for the response.

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