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vnaust vnaust
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Posts: 127
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A month ago
You are given the following information about COGS Inc., a sprocket manufacturer.

Balance Sheet:
ASSETS
Current assets:
Cash$ 40,000
Accounts receivable 40,000
Inventories50,000
Total current assets$130,000
Fixed assets:
Plant$500,000
Equipment 150,000
Less:
Accumulated Depreciation(100,000) 550,000
TOTAL ASSETS$680,000
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term loan$100,000
Accounts payable75,000
Taxes payable  20,000
  Total current liabilities$195,000
Long-term liabilities:
Mortgage on plant 200,000
  Total Liabilities 395,000
Shareholders' equity:
Capital stock, 20,000 common shares 200,000
Retained earnings   85,000
  Total shareholders' equity 285,000
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY$680,000

Income Statement:

Revenues$500,000
Less:
Cost of goods sold$250,000
Salaries 150,000
Depreciation  20,000
Interest on loan  10,000
Interest on mortgage  20,000
Total expenses 450,000
Net income before taxes 50,000
Income taxes  20,000
Net Income$ 30,000

a) COGS Inc. common shares were trading at $12 per share on financial statement date. Calculate the following ratios:
i) current
ii) quick
iii) debt-to-equity
iv) total debt-to-assets
v) gross operating margin
vi) return on common equity
vii) price-earnings

b) The following Industry Averages from the sprocket industry are provided to you. Based on your calculations from part a) and the industry average ratios, list and briefly discuss COGS Inc.'s relative financial and operating weaknesses?

Industry Averages
Current ratio 0.75
Quick ratio 0.52
Debt-to-equity 0.58
Total debt-to-assets 0.51
Gross operating margin 0.45
Return on common equity 0.10
Price-earnings ratio 7.00
Textbook 
Corporate Finance

Corporate Finance


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twogat123twogat123
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A month ago
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vnaust Author
wrote...

A month ago
Good timing, thanks!
wrote...

Yesterday
I appreciate what you did here, answered it right Smiling Face with Open Mouth
wrote...

2 hours ago
Thanks
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