How do I set this up? What do I do? I'm really confused on what to do. Please Help!
· 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 financial statement provided, follow these steps:
1. Current Ratio:
- Current Assets / Current Liabilities
- Calculate by dividing the total current assets ($560,000) by the total current liabilities ($280,000).
2. Quick Ratio:
- (Current Assets - Inventory) / Current Liabilities
- Calculate by subtracting the inventory ($200,000) from the current assets ($560,000), then dividing the result by the total current liabilities ($280,000).
3. Cash Ratio:
- Cash / Current Liabilities
- Calculate by dividing the cash amount ($70,000) by the total current liabilities ($280,000).
4. Working Capital:
- Current Assets - Current Liabilities
- Calculate by subtracting the total current liabilities ($280,000) from the total current assets ($560,000).
5. Debt-to-Equity Ratio:
- Total Liabilities / Total Stockholders' Equity
- Calculate by dividing the total liabilities ($480,000) by the total stockholders' equity ($620,000).
6. Debt Ratio:
- Total Liabilities / Total Assets
- Calculate by dividing the total liabilities ($480,000) by the total assets ($1,100,000).
7. Equity Ratio:
- Total Stockholders' Equity / Total Assets
- Calculate by dividing the total stockholders' equity ($620,000) by the total assets ($1,100,000).
8. Gross Profit Margin:
- Gross Profit / Sales
- Calculate by dividing the gross profit ($800,000) by the sales amount ($2,400,000).
9. Operating Profit Margin:
- Operating Profit (EBIT) / Sales
- Calculate by dividing the operating profit (EBIT) ($240,000) by the sales amount ($2,400,000).
10. Net Profit Margin:
- Earnings After Taxes (EAT) / Sales
- Calculate by dividing the earnings after taxes (EAT) ($135,000) by the sales amount ($2,400,000).
11. Return on Assets (ROA):
- Earnings After Taxes (EAT) / Total Assets
- Calculate by dividing the earnings after taxes (EAT) ($135,000) by the total assets ($1,100,000).
12. Return on Equity (ROE):
- Earnings After Taxes (EAT) / Total Stockholders' Equity
- Calculate by dividing the earnings after taxes (EAT) ($135,000) by the total stockholders' equity ($620,000).
13. Earnings per Share (EPS):
- Earnings After Taxes (EAT) / Number of Common Shares
- Calculate by dividing the earnings after taxes (EAT) ($135,000) by the number of common shares.
By using the provided financial statement, plug in the values into the respective formulas for each ratio to calculate the ratios you need.