70.2K

Verified Solution

Link Copied!

Following are the 2019 income statement and the balance sheet for Hum Drum Delectables. Hum Drum Delectables 2019 Income Statement Sales 400,000 Cost of goods sold 220,000 Other costs 80,000 Depreciation 10,000 EBIT 90,000 Interest expense 10,000 Earnings before tax 80,000 Taxes (20%) 16,000 Net Income 64,000 Hum Drum Delectables Balance Sheet 2019 Cash 40,000 Accounts payable Accounts receivable 36,000 Notes payable Inventories 20,000 Long-term debt Paid-in capital Net fixed assets 240,000 Retained earnings Total Assets 336,000 Total liab. and equity 2012 5,600 6,400 108,000 80,000 136,000 336,000 a. Current Ratio a b. Days of receivables (days sales outstanding) c. Debt-to-equity ratio d. Return on sales (net profit margin) Notes: - You do not need to calculate average values as is often done with some of the ratios (and I am not providing you with 2018 values anyway) You should show your calculations for pattial grades. e. Competitors to Hum Drum have an average of 15 days of receivables. Is there a situation when Hum Drum's receivables number makes sense in comparison to its competitors? Explain in one sentence. f. As manager of the company, you are going to the bank for an extension of the short-term credit for expansion plans. What would you point to (of the values calculated) in order to support your argument

Answer & Explanation Solved by verified expert

See Answer