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Megaframe Computer Company - Balance Sheet

Use the following information to answer the next eight questions:
MEGAFRAME COMPUTER COMPANY
Balance Sheet
As of December 31, 2006
ASSETS
Cash $ 40,000
Accounts Receivable 60,000
Inventory 90,000
New Plant and Equipment 220,000
Total Assets $410,000
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts Payable $ 60,000
Accrued Expenses 40,000

Long-Term debt 130,000
Common Stock 60,000
Paid-In capital 20,000
Retained earnings 100,000
Total Liabilities and Stockholders' Equity $410,000
MEGAFRAME COMPUTER COMPANY
Income Statement
For the Year Ended December 31, 2006
Sales (all on credit) $720,000
Cost of Goods Sold 500,000
Gross Profit 220,000
Sales and Administrative Expense 20,000
Depreciation 40,000
Operating Profit 160,000
Interest Expense 16,000
Profit before Taxes 144,000
Taxes (30%) 43,200
Net Income $100,800

The firm's return on equity is

52.8%

55.6%

56.0%

100.0%

The firm's average collection period is

30 days.

25 days.

14.4 days.

20 days.

The firm's receivable turnover is

4.4x

10x

12x

14.4x

Megaframe's quick ratio is

2

1

1.6

10

Megaframe's current ratio is

1.9

1.625

1.5

3.2

What is Megaframe Computer's total asset turnover?

4.50x

3.6x

2x

1.76x

The firm's debt to asset ratio is

56.1%

47.22%

33.33%

none of the above

Times interest earned for Megaframe Computer is

4.5x

9x

11x

10x

Solution Preview

Use the following information to answer the next eight questions:
MEGAFRAME COMPUTER COMPANY
Balance Sheet
As of December 31, 2006
ASSETS
Cash $ 40,000
Accounts Receivable 60,000
Inventory 90,000
New Plant and Equipment 220,000
Total Assets $410,000
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts Payable $ 60,000
Accrued Expenses 40,000

Long-Term debt 130,000
Common Stock 60,000
Paid-In capital 20,000
Retained earnings 100,000
Total Liabilities and Stockholders' Equity $410,000
MEGAFRAME COMPUTER COMPANY
Income Statement
For the Year Ended December 31, ...

Solution Summary

This solution is comprised of a detailed explanation to calculate, the firm's return on equity, the firm's average collection period, the firm's receivable turnover, quick ratio, current ratio, total asset turnover, debt to asset ratio, and times interest earned.

$2.19