Explore BrainMass
Share

Explore BrainMass

    Ratio calculation

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    The comparative balance sheet of a company at October 31, 2009 for the years 2009 and 2008, and the income statements for the years ended October 31, 2008 and 2009, are presented on the following page.

    Balance Sheet
    October 31

    Assets 2009 2008

    Cash $ 34,324 $13,050
    Accounts receivable 3,250 2,710
    Inventory 7,897 7,450
    Prepaid expenses 6,300 6,050
    Equipment 96,500 75,500
    Accumulated depreciation (25,200) (9,100)

    Total assets $123,071 $95,660

    Liabilities and Stockholders' Equity

    Accounts payable $ 3,650 $ 2,450
    Income taxes payable 10,251 11,200
    Dividends payable (on common stock) 28,000 25,000
    Salaries payable 2,250 1,280
    Interest payable 188 0
    Note payable-current portion 3,000 0
    Note payable-long-term portion 4,500 0
    Preferred stock, no par, $6 cumulative-
    3,000 and 2,500 shares issued,
    respectively 15,000 12,500
    Common stock, $1 par-23,180
    shares issued 23,180 23,180
    Additional paid in capital-treasury stock 250 250
    Retained earnings 32,802 19,800

    Total liabilities and stockholders' equity $123,071 $95,660

    Income Statement
    Year Ended October 31

    2009 2008
    Sales $485,625 $462,500
    Cost of goods sold 222,694 208,125
    Gross profit 262,931 254,375

    Operating expenses
    Depreciation expense 17,850 9,100
    Salaries and wages expense 147,979 146,350
    Other operating expenses 43,186 42,925
    Total operating expenses 209,015 198,375

    Income from operations 53,916 56,000

    Other expenses
    Interest expense 413 0
    Loss on sale of computer equipment 2,250 0
    Total other expenses 2,663 0

    Income before income tax 51,253 56,000
    Income tax expense 10,251 11,200

    Net income $ 41,002 $ 44,800

    Instructions: Calculate the following ratios for 2008 and 2009.

    2009
    1. Current ratio
    2. Debt to total assets
    3. Gross profit rate
    4. Profit margin
    5. Return on assets (Total assets at November 1, 2007, were $33,180.)
    6. Return on common stockholders' equity (Total common stockholders' equity at November 1, 2007, was $23,180.)
    7. Payout ratio

    2008
    1. Current ratio
    2. Debt to total assets
    3. Gross profit rate
    4. Profit margin
    5. Return on assets (Total assets at November 1, 2007, were $33,180.)
    6. Return on common stockholders' equity (Total common stockholders' equity at November 1, 2007, was $23,180.)
    7. Payout ratio

    © BrainMass Inc. brainmass.com October 9, 2019, 11:28 pm ad1c9bdddf
    https://brainmass.com/business/financial-ratios/ratio-calculation-257542

    Attachments

    Solution Summary

    The solution explains how to calculate the required ratios

    $2.19