ABC Company has 10,000 shares of common stock outstanding. The company also has the following amounts in revenue and expense accounts.
# of shares outstanding 10,000 Taxes 10,000 Interest expense 10,000 Depreciation expense 10,000 Selling, general and administrative expense 20,000 Sales revenue 100,000 Cost of goods sold 30,000 Calculate
(a) gross profits.
(b) operating profits.
(c) net profits before taxes.
(d) net profits after taxes.
(e) earnings per share.
40) Given the following balance sheet, income statement, historical ratios and industry averages, calculate the financial ratios listed in the table below for ABC Company for the most recent year and provide your comments on trends or financial strength of company.
Income StatementABC CompanyFor the Year Ended December 31, 2006 Sales Revenue $2,080,976 Less: Cost of Goods Sold 1,701,000 Gross Profits $379,976 Less: Operating Expenses 273,846 Operating Profits $106,130 Less: Interest Expense 19,296 Net Profits Before Taxes $86,834 Less: Taxes (40%) 34,810 Net Profits After Taxes $52,024
Balance SheetABC CompanyDecember 31, 2006 Assets Cash $ 95,000 Accounts receivable 237,000 Inventories 243,000 Total current assets $ 575,000 Gross fixed assets 500,000 Less: Accumulated depreciation 75,000 Net fixed assets $ 425,000 Total assets $1,000,000 Liabilities and stockholders’ equity Current liabilities Accounts payable $ 89,000 Notes payable 169,000 Accruals 87,000 Total current liabilities $ 345,000 Longterm debt 188,000 Total liabilities $ 533,000 Stockholders’ equity Common stock 255,000 Retained earnings 212,000 Total stockholders’ equity $ 467,000 Total liabilities and stockholders’ equity $1,000,000
Historical and Industry Average Ratios
ABC Company Ratio 2004 2005 2006 Industry2006 Current Ratio 1.6 1.7 — 1.6 Quick Ratio 0.9 1.0 — 0.9 Inventory Turnover 8.1 9.3 — 8.4 Average Collection Period 33 days 37 days — 39 days Total Asset…