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    McCord Corporation - Ratio Analysis for Financial Statements

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    Selected year-end financial statements of McCord Corporation follow. (Note: All sales are on credit;
    selected balance sheet amounts at December 31, 2004, were inventory, $32,400; total assets, $182,400;
    common stock, $90,000; and retained earnings, $31,300.)

    excel
    mhhe.com/larson

    McCORD CORPORATION
    Income Statement
    For Year Ended December 31, 2005
    Sales . . . . . . . . . . . . . . . . . . . $348,600
    Cost of goods sold . . . . . . . . 229,150
    Gross profit . . . . . . . . . . . . . 119,450
    Operating expenses . . . . . . . . 52,500
    Interest expense . . . . . . . . . . 3,100
    Income before taxes . . . . . . . 63,850
    Income taxes . . . . . . . . . . . . . 15,800
    Net income . . . . . . . . . . . . . . $ 48,050
    excel
    mhhe.com/larson
    McCORD CORPORATION
    Balance Sheet
    December 31, 2005
    Assets Liabilities and Equity
    Cash . . . . . . . . . . . . . . . . . . . . . . $ 9,000 Accounts payable . . . . . . . . . . . . . . . . . . $ 16,500
    Short-term investments . . . . . . . . . 7,400 Accrued wages payable . . . . . . . . . . . . . . 2,200
    Accounts receivable, net . . . . . . . . 28,200 Income taxes payable . . . . . . . . . . . . . . . . 2,300
    Notes receivable (trade)* . . . . . . . . 3,500 Long-term note payable, secured
    Merchandise inventory . . . . . . . . . . 31,150 by mortgage on plant assets . . . . . . . . . 62,400
    Prepaid expenses . . . . . . . . . . . . . . 1,650 Common stock, $1 par value . . . . . . . . . . 90,000
    Plant assets, net . . . . . . . . . . . . . . . 152,300 Retained earnings . . . . . . . . . . . . . . . . . . 59,800
    Total assets . . . . . . . . . . . . . . . . . . $233,200 Total liabilities and equity . . . . . . . . . . . . . $233,200

    Required
    Compute the following: (1) current ratio, (2) acid-test ratio, (3) days' sales uncollected, (4) inventory
    turnover, (5) days' sales in inventory, (6) ratio of pledged assets to secured liabilities, (7) times interest
    earned, (8) profit margin ratio, (9) total asset turnover, (10) return on total assets, and (11) return
    on common stockholders' equity.
    Check Acid-test ratio, 2.3 to 1;
    Inventory turnover, 7.2

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    Solution Preview

    Selected year-end financial statements of McCord Corporation follow. (Note: All sales are on credit; selected balance sheet amounts at December 31, 2004, were inventory, $32,400; total assets, $182,400; common stock, $90,000; and retained earnings, $31,300.)
    excel
    mhhe.com/larson
    McCORD CORPORATION
    Income Statement
    For Year Ended December 31, 2005
    Sales . . . . . . . . . . . . . . . . . . . $348,600
    Cost of goods sold . . . . . . . . 229,150
    Gross profit . . . . . . . . . . . . . 119,450
    Operating expenses . . . . . . . . 52,500
    Earnings before interest and tax 66,950
    Interest expense . . . . . . . . . . 3,100
    Income before taxes . . . . . . . 63,850
    Income taxes . . . . . . . . . . . . . 15,800
    Net income . . . . . . . . . . . . . . $ 48,050
    excel
    mhhe.com/larson
    McCORD CORPORATION
    Balance Sheet
    December 31, 2005
    Assets Liabilities and Equity
    Cash . . . . . . . . . . . . . . . . . . . . . . $ 9,000 Accounts payable . . . . . ...

    Solution Summary

    This solution is comprised of a detailed explanation to compute the following: (1) current ratio, (2) acid-test ratio, (3) days' sales uncollected, (4) inventory turnover, (5) days' sales in inventory, (6) ratio of pledged assets to secured liabilities, (7) times interest earned, (8) profit margin ratio, (9) total asset turnover, (10) return on total assets, and (11) return
    on common stockholders' equity. Attached as Word.

    $2.49

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