Following are data from the statements of two companies selling comparable products: Current Year-End Balance Sheets Sun Company Zeng Company Cash......................................................................................... 119.00 180.00 Notes receivable....................................................................... 77.00 32.00 Accounts receivable, net........................................................... 420.00 640.00 Merchandise inventory.............................................................. 588.00 877.00 Prepaid expenses...................................................................... 16.00 55.00 Plant and equipment, net........................................................... 2,321.00 2,744.00 Total assets............................................................................... 3,541.00 4,528.00 Current liabilities...................................................................... 560.00 800.00 Mortgage payable..................................................................... 700.00 800.00 Common shares, no-par value.................................................... 1,400.00 1,600.00 Retained earnings..................................................................... 881.00 1,328.00 Total liabilities and shareholders’ equity.................................... 3,541.00 4,528.00 Data from the Current Year’s Income Statement Sales........................................................................................ 6,720.00 8,800.00 Cost of goods sold.................................................................... 5,280.00 6,998.00 Interest expense........................................................................ 41.00 56.00 Net income............................................................................... 233.00 288.00 Beginning-of-Year Data Merchandise inventory.............................................................. 531.00 851.00 Total assets............................................................................... 3,458.00 4,431.00 Shareholders’ equity................................................................. 2,170.00 2,851.00 Required: Calculate the necessary ratios of the above two companies. Then analyses them to recommend the management which financially better in the better short-term credit risk.
Following are data from the statements of two companies selling comparable products:
Current Year-End Balance Sheets
|
|
Sun |
Zeng |
|
Cash......................................................................................... |
119.00 |
180.00 |
|
Notes receivable....................................................................... |
77.00 |
32.00 |
|
Accounts receivable, net........................................................... |
420.00 |
640.00 |
|
Merchandise inventory.............................................................. |
588.00 |
877.00 |
|
Prepaid expenses...................................................................... |
16.00 |
55.00 |
|
Plant and equipment, net........................................................... |
2,321.00 |
2,744.00 |
|
Total assets............................................................................... |
3,541.00 |
4,528.00 |
|
|
|
|
|
Current liabilities...................................................................... |
560.00 |
800.00 |
|
Mortgage payable..................................................................... |
700.00 |
800.00 |
|
Common shares, no-par value.................................................... |
1,400.00 |
1,600.00 |
|
Retained earnings..................................................................... |
881.00 |
1,328.00 |
|
Total liabilities and shareholders’ equity.................................... |
3,541.00 |
4,528.00 |
|
|
|
|
|
Data from the Current Year’s Income Statement |
||
|
Sales........................................................................................ |
6,720.00 |
8,800.00 |
|
Cost of goods sold.................................................................... |
5,280.00 |
6,998.00 |
|
Interest expense........................................................................ |
41.00 |
56.00 |
|
Net income............................................................................... |
233.00 |
288.00 |
|
Beginning-of-Year Data |
||
|
Merchandise inventory.............................................................. |
531.00 |
851.00 |
|
Total assets............................................................................... |
3,458.00 |
4,431.00 |
|
Shareholders’ equity................................................................. |
2,170.00 |
2,851.00 |
|
|
|
|
Required:
- Calculate the necessary ratios of the above two companies. Then analyses them to recommend the management which financially better in the better short-term credit risk.
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