GOODYEAR CALENDAR COMPANY, look over to see if needs corrections?

Using the financial statements for the Goodyear Calendar Company, calculate the 13 basic ratios GOODYEAR CALENDAR COMPANY Balance Sheet December 31, 2008 Assets Current assets: Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 40,000 Marketable securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,000 Accounts receivable (net) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120,000 Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 180,000 Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 370,000 Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,000 Plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 450,000 Less: Accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . (100,000) Net plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . 350,000 Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 760,000 GOODYEAR CALENDAR COMPANY Liabilities and Stockholders’ Equity Current liabilities: Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 90,000 Notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000 Accrued taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000 Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110,000 Long-term liabilities: Bonds payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 170,000 Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 280,000 Stockholders’ equity Preferred stock, $100 par value . . . . . . . . . . . . . . . . . . . . . . . . 90,000 Common stock, $1 par value . . . . . . . . . . . . . . . . . . . . . . . . . . 60,000 Capital paid in excess of par . . . . . . . . . . . . . . . . . . . . . . . . . . 230,000 Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,000 Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . 480,000 Total liabilities and stockholders’ equity . . . . . . . . . . . . . . . . . . . . $ 760,000 GOODYEAR CALENDAR COMPANY Income Statement For the Year Ending December 31, 2008 Sales (on credit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,000,000 Less: Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,300,000 Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 700,000 Less: Selling and administrative expenses . . . . . . . . . . . . . . . 400,000* Operating profit (EBIT) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 300,000 Less: Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,000 Earnings before taxes (EBT) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 280,000 Less: Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112,000 Earnings after taxes (EAT) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 168,000 *Includes $10,000 in lease payments. Profitability ratios. 1. Profit margin = net income/sales = 168,000/2,000,000= 0.05% 2. Return on assets (investment) = net income/total assets=168,000/760,000= 0.22% 3. Return on equity = net income/stockholder’s equity=168,000/480,000= 0.35% Asset Utilization Ratios – 4. Receivables Turnover = sales (credit)/receivables=2,000,000/120,000= 16.7x 5. Average collection period = accounts receivable/average daily credit sales=120,000/2,000,000= 166 days 6. Inventory turnover = sales/inventory=2,000,000/180,000=11x 7. Fixed asset turnover = sales/fixed assets=2,000,000/350,000=5.71x 8. Total asset turnover = sales/total assets=2,000,000/760,000=2.63x Liquidity Ratios – 9. Current Ratio = current assets/current liabilities=370,000/110,000=3x 10. Quick Ratio = current assets – inventory/current liabilities=370,000-180,000/110,000=190,000/110,000=1.72x Debt Utilization Ratios – 11. Debt to total assets = total debt/total assets=280,000/760,000=36.84% 12. Times interest earned = income before interest and taxes/interest=300,000/20,000=15x 13. Fixed charge coverage = income before fixed charges and taxes/fixed charges=300,000+30,000=$330,000 30,000+20,000=$50,000 300,000/50,000=6x

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