Consider the following financial data for Terry Enterprises: Balance Sheet as of December 31, 2018 Cash $ 86,000 Accounts payable $ 15,500 Accts. receivable 91,500 Notes payable 93,500 Inventories 65,500 Accruals 19,500 Total current assets $ 243,000 Total current liabilities $ 128,500 Long-term debt 162,500 Net plant & equip. 419,500 Common equity 371,500 Total assets $ 662,500 Total liab. & equity $ 662,500 Statement of Earnings for 2018 Industry Average Ratios Net sales $ 642,500 Current ratio 2.2× Cost of goods sold 482,000 Quick ratio 1.7× Gross profit $ 160,500 Days sales outstanding 44 days Operating expenses 119,500 Inventory turnover 6.7× EBIT $ 41,000 Total asset turnover 0.6× Interest expense 14,500 Net profit margin 7.2% Pre-tax earnings $ 26,500 Return on assets 4.4% Income taxes (35%) 9,275 Return on equity 7.7% Net profit $ 17,225 Debt-to-capital ratio 31% Compared to other firms in the same industry, Terry... a. has a shorter average collection period for receivables. b. obtains more of its capital from equity financing. c. generates less profit per dollar of total assets. d. has a higher profit margin. e. is better able to meet its short-term obligations.
Consider the following financial data for Terry Enterprises: Balance Sheet as of December 31, 2018 Cash $ 86,000 Accounts payable $ 15,500 Accts. receivable 91,500 Notes payable 93,500 Inventories 65,500 Accruals 19,500 Total current assets $ 243,000 Total current liabilities $ 128,500 Long-term debt 162,500 Net plant & equip. 419,500 Common equity 371,500 Total assets $ 662,500 Total liab. & equity $ 662,500 Statement of Earnings for 2018 Industry Average Ratios Net sales $ 642,500 Current ratio 2.2× Cost of goods sold 482,000 Quick ratio 1.7× Gross profit $ 160,500 Days sales outstanding 44 days Operating expenses 119,500 Inventory turnover 6.7× EBIT $ 41,000 Total asset turnover 0.6× Interest expense 14,500 Net profit margin 7.2% Pre-tax earnings $ 26,500 Return on assets 4.4% Income taxes (35%) 9,275 Return on equity 7.7% Net profit $ 17,225 Debt-to-capital ratio 31% Compared to other firms in the same industry, Terry... a. has a shorter average collection period for receivables. b. obtains more of its capital from equity financing. c. generates less profit per dollar of total assets. d. has a higher profit margin. e. is better able to meet its short-term obligations.
Cornerstones of Financial Accounting
4th Edition
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Jay Rich, Jeff Jones
Chapter9: Long-term Liabilities
Section: Chapter Questions
Problem 89E: Ratio Analysis Rising Stars Academy provided the following information on its 2019 balance sheet and...
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Consider the following financial data for Terry Enterprises:
Balance Sheet as of December 31, 2018Cash $86,000Accounts payable $ 15,500Accts. receivable 91,500Notes payable 93,500Inventories 65,500Accruals 19,500Total current assets $243,000Total current liabilities $ 128,500Long-term debt 162,500Net plant & equip. 419,500Common equity 371,500Total assets $662,500Total liab. & equity $ 662,500Statement of Earnings for 2018Industry Average RatiosNet sales $642,500Current ratio 2.2×Cost of goods sold 482,000Quick ratio 1.7×Gross profit $160,500Days sales outstanding 44 daysOperating expenses 119,500Inventory turnover 6.7×EBIT $41,000Total asset turnover 0.6×Interest expense 14,500Net profit margin 7.2%Pre-tax earnings $26,500Return on assets 4.4%Income taxes (35%) 9,275Return on equity 7.7%Net profit $17,225Debt-to-capital ratio 31%
Compared to other firms in the same industry, Terry...a. has a shorter average collection period for receivables.
b. obtains more of its capital from equity financing.
c. generates less profit per dollar of total assets.
d. has a higher profit margin.
e. is better able to meet its short-term obligations.
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