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· 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
To calculate the 13 basic ratios using the provided financial statements, follow these steps:
1. Calculate the Current Ratio:
- Divide the total current assets ($560,000) by the total current liabilities ($280,000)
2. Calculate the Quick Ratio:
- Subtract the inventory ($200,000) from the total current assets ($560,000)
- Divide the result by the total current liabilities ($280,000)
3. Calculate the Cash Ratio:
- Divide the cash ($70,000) by the total current liabilities ($280,000)
4. Calculate the Working Capital:
- Subtract the total current liabilities ($280,000) from the total current assets ($560,000)
5. Calculate the Accounts Receivable Turnover:
- Divide the net credit sales ($2,400,000) by the average accounts receivable balance [(Beginning accounts receivable + Ending accounts receivable) / 2]
6. Calculate the Inventory Turnover:
- Divide the cost of goods sold ($1,600,000) by the average inventory balance [(Beginning inventory + Ending inventory) / 2]
7. Calculate the Total Asset Turnover:
- Divide the net sales ($2,400,000) by the average total assets [(Beginning total assets + Ending total assets) / 2]
8. Calculate the Debt Ratio:
- Divide the total liabilities ($480,000) by the total assets ($1,100,000)
9. Calculate the Equity Ratio:
- Divide the total stockholders' equity ($620,000) by the total assets ($1,100,000)
10. Calculate the Debt-to-Equity Ratio:
- Divide the total liabilities ($480,000) by the total stockholders' equity ($620,000)
11. Calculate the Gross Profit Margin:
- Divide the gross profit ($800,000) by the net sales ($2,400,000)
12. Calculate the Operating Profit Margin:
- Divide the operating profit (EBIT) ($240,000) by the net sales ($2,400,000)
13. Calculate the Net Profit Margin:
- Divide the earnings after taxes (EAT) ($135,000) by the net sales ($2,400,000)
Now, you can calculate each of the ratios using the provided information.
To calculate the 13 basic ratios using the provided financial statements, follow these steps:
1. Current Ratio: Divide total current assets ($560,000) by total current liabilities ($280,000).
Current Ratio = Total Current Assets / Total Current Liabilities
Current Ratio = $560,000 / $280,000
2. Quick Ratio: Subtract inventory ($200,000) from total current assets ($560,000) and then divide the result by total current liabilities ($280,000).
Quick Ratio = (Total Current Assets - Inventory) / Total Current Liabilities
Quick Ratio = ($560,000 - $200,000) / $280,000
3. Cash Ratio: Divide cash ($70,000) by total current liabilities ($280,000).
Cash Ratio = Cash / Total Current Liabilities
Cash Ratio = $70,000 / $280,000
4. Net Working Capital: Subtract total current liabilities ($280,000) from total current assets ($560,000).
Net Working Capital = Total Current Assets - Total Current Liabilities
Net Working Capital = $560,000 - $280,000
5. Debt-to-Equity Ratio: Divide total liabilities ($480,000) by total stockholders' equity ($620,000).
Debt-to-Equity Ratio = Total Liabilities / Total Stockholders' Equity
Debt-to-Equity Ratio = $480,000 / $620,000
6. Debt Ratio: Divide total liabilities ($480,000) by total assets ($1,100,000).
Debt Ratio = Total Liabilities / Total Assets
Debt Ratio = $480,000 / $1,100,000
7. Equity Ratio: Divide total stockholders' equity ($620,000) by total assets ($1,100,000).
Equity Ratio = Total Stockholders' Equity / Total Assets
Equity Ratio = $620,000 / $1,100,000
8. Gross Profit Margin: Divide gross profit ($800,000) by sales ($2,400,000).
Gross Profit Margin = Gross Profit / Sales
Gross Profit Margin = $800,000 / $2,400,000
9. Operating Profit Margin: Divide operating profit (EBIT) ($240,000) by sales ($2,400,000).
Operating Profit Margin = Operating Profit / Sales
Operating Profit Margin = $240,000 / $2,400,000
10. Net Profit Margin: Divide earnings after taxes (EAT) ($135,000) by sales ($2,400,000).
Net Profit Margin = Earnings After Taxes / Sales
Net Profit Margin = $135,000 / $2,400,000
11. Return on Assets (ROA): Divide earnings before taxes (EBT) ($210,000) by total assets ($1,100,000).
Return on Assets = Earnings Before Taxes / Total Assets
Return on Assets = $210,000 / $1,100,000
12. Return on Equity (ROE): Divide earnings after taxes (EAT) ($135,000) by total stockholders' equity ($620,000).
Return on Equity = Earnings After Taxes / Total Stockholders' Equity
Return on Equity = $135,000 / $620,000
13. Earnings per Share (EPS): Divide earnings after taxes (EAT) ($135,000) by the number of common shares outstanding (not provided in the financial statements).
Earnings per Share = Earnings After Taxes / Number of Common Shares Outstanding
Note: Some ratios may require additional information not provided in the financial statements to be calculated accurately.