Maurice Tutor
$15/per page/Negotiable
The ABC Corporation has a profit margin on sales below the industry average, yet its ROA is above the industry average. What does this imply about its asset turnover?
A company’s current ratio is 2. If the company uses cash to retire notes payable due within one year, would this transaction increase or decrease the current ratio? What about the asset turnover ratio?
|
 Income Statement |
 2012 |
 | |
|
Sales |
$5,500,000 |
||
|
Cost of goods sold |
2,850,000 |
||
|
Depreciation |
280,000 |
||
|
Selling & administrative expenses |
1,500,000 |
||
|
EBIT |
870,000 |
||
|
Interest expense |
130,000 |
||
|
Taxable income |
740,000 |
||
|
Taxes |
330,000 |
||
|
Net income |
$ 410,000 |
||
|
Balance Sheet, year-end Assets Cash |
2012 Â $ 50,000 |
 |
2011 Â $ 40,000 |
|
Accounts receivable |
660,000 |
 |
690,000 |
|
Inventory |
490,000 |
 |
480,000 |
|
Total current assets |
$1,200,000 |
 |
$1,210,000 |
|
Fixed assets |
3,100,000 |
 |
2,800,000 |
|
Total assets |
$4,300,000 |
 |
$4,010,000 |
|
Liabilities and shareholders’ equity Accounts payable |
  $ 340,000 |
 |
  $ 450,000 |
|
Short-term debt |
480,000 |
 |
550,000 |
|
Total current liabilities |
$ 820,000 |
 |
$1,000,000 |
|
Long-term bonds |
2,520,000 |
 |
2,200,000 |
|
Total liabilities |
$3,340,000 |
 |
$3,200,000 |
|
Common stock |
$ 310,000 |
 |
$ 310,000 |
|
Retained earnings |
650,000 |
 |
500,000 |
|
Total shareholders’ equity |
$ 960,000 |
 |
810,000 |
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