50.1K

Verified Solution

Link Copied!

ACE Ent. Income Statement for year ended 31 July 2020
	$
Sales	235,000
Cost of goods sold	-126,500
Gross profit	108,500
Operating expenses	-39,350
Earnings before interest and taxes	69,150
Interest expense	-14,250
Earnings before taxes	54,900
Taxes	-26,875
Net income	28,025

ACE Enterprise Balance Sheet as at 31 July 2020
Non-current assets
Property	37,850
Plant and equipment	105,500
Less: Accumulated depreciation	-8,975
	134,375
Current assets
Inventories	16,540
Accounts receivable	13,750
Cash and bank	2,100
	32,390
Total assets	166,765

Common stock		80,000
Retained earnings		31,165
Share premium		2,000
		113,165
Long-term liabilities
Bank Loan		15,000
Secured bond		20,000
		35,000
Current liabilities
Accounts payable		10,850
Short-term bank notes		6,000
Accrued expenses		1,750
	18,600
Total debt and equity	166,765

Additional Information:

Book value per share $0.40

Market price per share $1.90

1. Use the information provided in the Income statement and Balance sheet for ACE Enterprise to calculate the following ratios (Show working clearly and round answers to 2 decimal places).

1. Debt ratio
2. Times interest earned
3. Current ratio
4. Acid test ratio
5. Average collection period
6. Operating profit margin
7. Net profit margin
8. Accounts receivable turnover
9. Payables Payment Period
10. Price-earnings ratio
11. Market-to-book ratio
12. Inventory turnover
13. Gross profit margin
14. Return on equity
15. Fixed asset turnover

2. Assume you receive the income statement below on a test as a part of a job interview. Fill in the missing income statement values. (Show your workings) [10 marks]

	$
Sales	250,000
Cost of goods sold	?
Gross profit	150,000
Operating expenses	60,000
Operating income	?
Interest expense	?
Income before taxes	80,000
Tax expense (40%)	?
Net Income	?

Answer & Explanation Solved by verified expert

See Answer