· Complete using the financial statement below to calculate the 13 basic ratios found in the chapter. There is NO need to repeat the financial statements in your assignment. Just show the calculations of each ratio:
FORD MOTOR CORPORATION
Balance Sheet
December 31, 200x
Assets
Current assets:
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 70,000
Marketable securities . . . . . . . . . . . . . . . . 40,000
Accounts receivable (net) . . . . . . . . . . . . . 250,000
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . 200,000
Total current assets . . . . . . . . . . . . . . . . 560,000
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . 100,000
Net plant and equipment . . . . . . . . . . . . . . 440,000
Total assets. . . . . . . . . . . . . . . . . . . . . . . . .$1,100,000
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . 130,000
Notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . 120,000
Accrued taxes . . . . . . . . . . . . . . . . . . . . . . . . . . 30,000
Total current liabilities . . . . . . . . . . . . . . . . . . $280,000
Long-term liabilities:
Bonds payable . . . . . . . . . . . . . . . . . . . . . . . . . 200,000
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 480,000
Stockholders’ equity
Preferred stock, $100 par value . . . . . . . . . . . . 150,000
Common stock, $5 par value . . . . . . . . . . . . . . 50,000
Capital paid in excess of par. . . . . . . . . . . . . . . 200,000
Retained earnings. . . . . . . . . . . . . . . . . . . . . . . 220,000
Total stockholders’ equity. . . . . . . . . . . . . . . . 620,000
Total liabilities and stockholders’ equity . . . .$1,100,000
FORD MOTOR CORPORATION
Income Statement
For the Year Ending December 31, 200X
Sales (on credit) . . . . . . . . . . . . . . . . . . . . . . . .$2,400,000
Less: Cost of goods sold. . . . . . . . . . . . . . . . . .. 1,600,000
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 800,000
Less: Selling and administrative expenses . . . . . . 560,000*
Operating profit (EBIT) . . . . . . . . . . . . . . . . . . . . 240,000
Less: Interest expense . . . . . . . . . . . . . . . . . . . . . . 30,000
Earnings before taxes (EBT) . . . . . . . . . . . . . . . . . 210,000
Less: Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75,000
Earnings after taxes (EAT) . . . . . . . . . . . . . . . . . $ 135,000
what is your question about this assignment?
To calculate the 13 basic ratios using the provided financial statement, we will need to use the following formulas:
1. Current Ratio = Current Assets / Current Liabilities
2. Quick Ratio = (Current Assets - Inventory) / Current Liabilities
3. Cash Ratio = Cash / Current Liabilities
4. Total Debt Ratio = Total Liabilities / Total Assets
5. Debt-Equity Ratio = Total Liabilities / Total Stockholders' Equity
6. Equity Multiplier = Total Assets / Total Stockholders' Equity
7. Times Interest Earned Ratio = EBIT / Interest Expense
8. Gross Profit Margin = Gross Profit / Sales
9. Operating Profit Margin = Operating Profit / Sales
10. Net Profit Margin = Earnings After Taxes (EAT) / Sales
11. Return on Assets (ROA) = Earnings After Taxes (EAT) / Total Assets
12. Return on Equity (ROE) = Earnings After Taxes (EAT) / Total Stockholders' Equity
13. Return on Invested Capital (ROIC) = Earnings After Taxes (EAT) / (Total Stockholders' Equity + Long-term Liabilities)
Now, let's calculate each ratio using the provided financial statement:
1. Current Ratio:
Current Assets = $560,000
Current Liabilities = $280,000
Current Ratio = $560,000 / $280,000 = 2
2. Quick Ratio:
Current Assets = $560,000
Inventory = $200,000
Current Liabilities = $280,000
Quick Ratio = ($560,000 - $200,000) / $280,000 = 1.14
3. Cash Ratio:
Cash = $70,000
Current Liabilities = $280,000
Cash Ratio = $70,000 / $280,000 = 0.25
4. Total Debt Ratio:
Total Liabilities = $480,000
Total Assets = $1,100,000
Total Debt Ratio = $480,000 / $1,100,000 = 0.44
5. Debt-Equity Ratio:
Total Liabilities = $480,000
Total Stockholders' Equity = $620,000
Debt-Equity Ratio = $480,000 / $620,000 = 0.77
6. Equity Multiplier:
Total Assets = $1,100,000
Total Stockholders' Equity = $620,000
Equity Multiplier = $1,100,000 / $620,000 = 1.77
7. Times Interest Earned Ratio:
EBIT = $240,000
Interest Expense = $30,000
Times Interest Earned Ratio = $240,000 / $30,000 = 8
8. Gross Profit Margin:
Gross Profit = $800,000
Sales = $2,400,000
Gross Profit Margin = $800,000 / $2,400,000 = 0.33
9. Operating Profit Margin:
Operating Profit = $240,000
Sales = $2,400,000
Operating Profit Margin = $240,000 / $2,400,000 = 0.1
10. Net Profit Margin:
Earnings After Taxes (EAT) = $135,000
Sales = $2,400,000
Net Profit Margin = $135,000 / $2,400,000 = 0.05625
11. Return on Assets (ROA):
Earnings After Taxes (EAT) = $135,000
Total Assets = $1,100,000
Return on Assets (ROA) = $135,000 / $1,100,000 = 0.1227
12. Return on Equity (ROE):
Earnings After Taxes (EAT) = $135,000
Total Stockholders' Equity = $620,000
Return on Equity (ROE) = $135,000 / $620,000 = 0.2177
13. Return on Invested Capital (ROIC):
Earnings After Taxes (EAT) = $135,000
Total Stockholders' Equity = $620,000
Long-term Liabilities = $200,000
Return on Invested Capital (ROIC) = $135,000 / ($620,000 + $200,000) = 0.1622
These are the calculations for each of the 13 basic ratios using the given financial statement.