Question : PART II — RATIO ANALYSIS (27 points) Financial statements for Advantage : 1311551

 

PART II — RATIO ANALYSIS (27 points)

Financial statements for Advantage Corporation are presented below.

 

ADVANTAGE CORPORATION

Comparative Balance Sheet

December 31

2014                                                         2013

Assets

Cash…………………………………………..$    8,000$  12,000

Accounts receivable (net)…………………………….64,00048,000

Inventory……………………………………….40,00036,000

Land…………………………………………..24,00016,000

Machinery………………………………………124,00096,000

Accumulated depreciation…………………………….   (40,000) (28,000)

Total assets………………………………………$220,000$180,000

 

Liabilities and Stockholders’ Equity

Accounts payable………………………………….$  40,000$32,000

Long-term notes payable……………………………..70,00058,000

Common stock ($2 par value)…………………………..80,00080,000

Retained earnings………………………………….    30,000    10,000

Total liabilities and stockholders’ equity……………………$220,000$180,000

 

ADVANTAGE CORPORATION

Income Statement

For the year ended December 31, 2014

 

Sales………………………………………………….$720,000

Less: Sales returns and allowances……………………………….    20,000

Net sales……………………………………………….$700,000

Cost of goods sold………………………………………….  550,000

Gross profit……………………………………………..150,000

Selling expenses…………………………………………..42,000

Administrative expenses……………………………………..    28,000

Income before income taxes…………………………………..80,000

Income tax expense………………………………………..    24,000

Net income………………………………………………$  56,000

 

Additional Information:  All sales were on account. Cash dividends were declared and paid during 2014. The market price of Advantage’s common stock was $25 on December 31, 2013, and $28 on December 31, 2014.

 

Instructions: Compute the indicated ratios at December 31, 2014, or for the year ended December 31, 2014, as appropriate. Report answers to one decimal place.

 

1.Return on assets  ____________________________________________________________.

 

 

 

 

2.Acid-test ratio  _____________________________________________________________.

 

 

 

 

3.Profit margin  ______________________________________________________________.

 

 

 

 

4.Payout ratio _______________________________________________________________.

 

 

 

 

5.Debt to total assets ratio  ______________________________________________________.

 

 

 

 

6.Asset turnover  _____________________________________________________________.

 

 

 

 

7.Receivables turnover _________________________________________________________.

 

 

 

 

8.Price-earnings ratio  _________________________________________________________.

 

 

 

 

9.Current ratio  ______________________________________________________________.