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Financial Analysis Exercises

The document provides balance sheets for Royal Bros., Inc. as of December 31, Year 1 and Year 2 and an income statement for Year 2. The balance sheets show increases in cash, inventories, and retained earnings from Year 1 to Year 2, along with decreases in accounts receivable and property, plant, and equipment. The income statement details the company's sales, expenses, taxes, and net income for Year 2.

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Spencer Mosquisa
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383 views

Financial Analysis Exercises

The document provides balance sheets for Royal Bros., Inc. as of December 31, Year 1 and Year 2 and an income statement for Year 2. The balance sheets show increases in cash, inventories, and retained earnings from Year 1 to Year 2, along with decreases in accounts receivable and property, plant, and equipment. The income statement details the company's sales, expenses, taxes, and net income for Year 2.

Uploaded by

Spencer Mosquisa
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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The Comparative Balance Sheets for Year 1 and Year 2 and the Year 2 Income Statement for Royal

Bros., Inc. are as follows:

Royal Bros, Inc.


Balance Sheet
December 31, Year 1 December 31, Year 2
Assets
Cash $ 54,000 $ 180,000
Accounts Receivable 540,000 360,000
Inventories 720,000 1,080,000
Property, Plant, and Equipment (net) 2,646,000 2,520,000
Total Assets $3,960,000 $4,140,000
Liabilities and Shareholders' Equity
Accounts Payable $ 900,000 $ 680,400
5% Mortgage Payable 1,494,000 1,440,000
Common Stock 1,080,000 1,080,000
Retained Earnings 486,000 939,600
Total Liabilities and Shareholders' Equity $3,960,000 $4,140,000
Royal Bros, Inc.
Income Statement
For the Year Ended December 31, Year 2
Sales on Account $3,240,000
Less Expenses:
Cost of Goods Sold (1,800,000)
Salary Expense (594,000)
Depreciation Expense (126,000)
Interest Expense (72,000)
Income before Income Taxes $ 648,000
Income Tax Expense at 35 percent (226,800)
Net Income $ 421,200

Compute the following ratios for Royal Bros., Inc. for Year 2 or on December 31, Year 2 as appropriate.

a. Current Ratio on December 31, Year 2.


b. Quick Ratio on December 31, Year 2 (inventory cannot be quickly converted to cash).
c. Debt Ratio on December 31, Year 2.
d. Total Assets Turnover Ratio for Year 2.
e. TIE Ratio for Year 2.
f. Inventory Turnover Ratio for Year 2.
g. DSO for Year 2.
h. Long-Term Debt Ratio on December 31, Year 2.
i. Fixed Asset Turnover Ratio for Year 2.

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