Profitability and Liquidity Measures
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Presented here are the comparative balance sheets of Hames, Inc., at December 31, 2011 and 2010. Sales for the year ended December 31, 2011, totaled $580,000.
HAMES, INC.
Balance Sheets
December 31, 2011 and 2010
2011 2010
Assets
Cash $ 21,000 $ 19,000
Accounts receivable 78,000 72,000
Merchandise inventory 103,000 99,000
Total current assets $ 202,000 $ 190,000
Land 50,000 40,000
Plant and equipment 125,000 110,000
Less: Accumulated depreciation (65,000 ) (60,000 )
Total assets $ 312,000 $ 280,000
Liabilities
Short-term debt $ 18,000 $ 17,000
Accounts payable 56,000 48,000
Other accrued liabilities 20,000 18,000
Total current liabilities $ 94,000 $ 83,000
Long-term debt 22,000 30,000
Total liabilities . $ 116,000 $ 113,000
Owners' Equity
Common stock, no par, 100,000 shares authorized
40,000 and 25,000 shares issued, respectively $ 74,000 $ 59,000
Retained earnings:
Beginning balance $ 108,000 $ 85,000
Net income for the year 34,000 28,000
Dividends for the year (20,000 ) (5,000 )
Ending balance $ 122,000 $ 108,000
Total owners' equity $ 196,000 $ 167,000
Total liabilities and owners' equity $ 312,000 $ 280,000
________________________________________
Requirement 1:
Calculate ROI for 2011. (Round your percentage answer to two decimal places. Omit the "%" sign in your response.)
ROI
%
Requirement 2:
Calculate ROE for 2011. (Round your percentage answer to one decimal place. Omit the "%" sign in your response.)
ROE
%
Requirement 3:
Calculate working capital at December 31, 2011. (Omit the "$" sign in your response.)
Working capital $
Requirement 4:
Calculate the current ratio at December 31, 2011. (Round your answer to two decimal places.)
Current ratio
Requirement 5:
Calculate the acid-test ratio at December 31, 2011. (Round your answer to two decimal places.)
Acid test ratio
Requirement 6:
Assume that on December 31, 2011, the treasurer of Hames, Inc., decided to pay $15,000 of accounts payable. What impact, if any, this payment will have on the answers you calculated for requirements 1-4 (increase, decrease, or no effect)
(a) ROI for the year ended December 31, 2011
(b) ROE for the year ended December 31, 2011:
(c) Working capital as at December 31, 2011:
(d) Current ratio as at December 31, 2011:
Requirement 7:
Assume that instead of paying $15,000 of accounts payable on December 31, 2011. Hames, Inc., collected $15,000 of accounts receivable. What impact, if any, this receipt will have on the answers you calculated for requirements 1-4 (increase, decrease, or no effect)
(a) ROI for the year ended December 31, 2011:
(b) ROE for the year ended December 31, 2011:
(c) Working capital as at December 31, 2011:
(d) Current ratio as at December 31, 2011:
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Solution Summary
Profitability and liquidity measures are examined.
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Presented here are the comparative balance sheets of Hames, Inc., at December 31, 2011 and 2010. Sales for the year ended December 31, 2011, totaled $580,000.
HAMES, INC.
Balance Sheets
December 31, 2011 and 2010
2011 2010
Assets
Cash $ 21,000 $ 19,000
Accounts receivable 78,000 72,000
Merchandise inventory 103,000 99,000
Total current assets $ 202,000 $ 190,000
Land 50,000 40,000
Plant and equipment 125,000 110,000
Less: Accumulated depreciation (65,000 ) (60,000 )
Total assets $ 312,000 $ 280,000
Liabilities
Short-term debt $ 18,000 $ 17,000
Accounts payable 56,000 48,000
Other accrued liabilities 20,000 18,000
Total current ...
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