Answered: (1) Debt and equity ratios. Debt Ratio…

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter16: Financial Statement Analysis

Section: Chapter Questions

Problem 4PB

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Question

Simon Company’s year-end balance sheets follow.

At December 31	Current Yr	1 Yr Ago	2 Yrs Ago
Assets
Cash		$	34,026	$	39,379	$	39,798
Accounts receivable, net			98,617		68,224		53,063
Merchandise inventory			120,309		91,975		57,666
Prepaid expenses			10,957		10,544		4,602
Plant assets, net			307,089		282,118		255,071
Total assets		$	570,998	$	492,240	$	410,200
Liabilities and Equity
Accounts payable		$	142,179	$	81,525	$	53,063
Long-term notes payable secured by mortgages on plant assets			104,127		112,083		88,841
Common stock, $10 par value			162,500		162,500		162,500
Retained earnings			162,192		136,132		105,796
Total liabilities and equity		$	570,998	$	492,240	$	410,200

The company’s income statements for the Current Year and 1 Year Ago, follow.

For Year Ended December 31	Current Yr	1 Yr Ago
Sales			$	742,297			$	585,766
Cost of goods sold	$	452,801			$	380,748
Other operating expenses		230,112				148,199
Interest expense		12,619				13,473
Income tax expense		9,650				8,786
Total costs and expenses				705,182				551,206
Net income			$	37,115			$	34,560
Earnings per share			$	2.28			$	2.13

For both the Current Year and 1 Year Ago, compute the following ratios:

(1) Debt and equity ratios.

Complete this question by entering your answers in the tabs below.
Req 1
Reg 2 and 3
Express the balance sheets in common-size percents. (Do not round intermediate calculations and round your final percentage
answers to 1 decimal place.)
SIMON COMPANY
Common-Size Comparative Balance Sheets
December 31
Current Year
1 Year Ago
2 Years Ago
Assets
Cash
%
%
%
Accounts receivable, net
Merchandise inventory
Prepaid expenses
Plant assets, net
Total assets
%
%
Liabilities and Equity
Accounts payable
%
%
%
Long-term notes payable secured by
mortgages on plant assets
Common stock, $10 par
Retained earnings
Total liabilities and equity
%
%
< Req 1
Req 2 and 3 >

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(1) Debt and equity ratios. Debt Ratio Choose Numerator: Choose Denominator: Debt Ratio Total liabilities I Total equity Debt ratio 246,306 Is 324,692 = 75.9 % Current Year: 1 Year Ago: 0 % Equity Ratio Choose Numerator: Choose Denominator: Equity Ratio Equity ratio Current Year: 0 % 1 Year Ago: