The balance sheet and income statement for Johnson and Breakwater is presented below.
Balance Sheet (000)
Cash$500
Accounts receivable1,500
Inventories500
Current assets2,500
Net fixed assets5,000
Total Assets7,500
Accounts payable1,200
Bank note300
Total current liabilities1,500
long-term debt4,000
Common stock300
Retained earnings1,700
Total liabilities and owners' equity$7,500
Income Statement (000)
Net sales$8,500
Cost of goods sold(3,400)
Gross profit5,100
Operating expenses(2,900)
Net operating income2,200
Interest expense (580)
Earnings before taxes1,620
Income tax (34%)(551)
Net income$1,069
a.Compute the following ratios: Current ratio, Acid test ratio, Debt ratio, Total asset turnover, Operating profit margin, Return on total investments, Times interest earned, Inventory turnover.
b.All other things equal, compute the dollar amount of sales needed to achieve an 18% return on total assets for the coming year.
c.Given Johnson's inventory turnover ratio, find a way of computing the current level of inventory given this ratio and assuming the current level of inventories is unknown. Set up but do not solve.
Quick Reply
