Bruno Corporation Balance Sheet December 31 2014 and 2013 20

Bruno Corporation Balance Sheet December 31, 2014 and 2013 20142013 ASSETS Cash. 40,000 30,000 65,000 60,000 165,000 Accounts receivable (net 140.000 -185.000 80000 350.000 $320.000 Current assets s LIABILTIES AND STOCKHOLDERS EQUITY Accounts payable.... 50.000 60000 60,000 100,000 Current iablies 50,000 Mortgage payable (15%, due in 15 years) Common stock, $10 par. Retained earnings 100,000 140000 120,000 60.00040.000 Total liabilities and stockholders\' equity Net income was $25,000 2. Net sales was $425,000. 3. Cost of goods sold was $275,000 4. Interest expense was $15,000 5. Income tax expense was $10,000 6. Common shares outstanding were 14,000 shares in 2014 and 12,000 shares in 2013 Instructions Compute the tollowing ratios at December 31, 2014 (Show your work as well as the ratio rounded to the nearest hundredth; for example, 75/100 (a) Current ratio (b) Cash ratio (c) Inventory turnover (d) Debt to Equity 0.75) (e) Times Interest Eamed (n Profit margin ratio (g) Rate of return on common stockholders equity h) Eamings per share

Solution

a) Current ratio = current assets / current liabilities

= 165000 / 50000

= 3.30

b) Cash ratio =cash + cash equivalents / current liabilites

= 40000 / 50000

= 0.80

c) Inventory turnover = COGS / average inventory

= 275000 / ((50000+60000)/2)

= 5 times

d) Debt to equity = total debt / shareholders equity

= 100000 / 200000

= 0.50

e) Times interest earned = EBIT / interest expense

EBIT = net income + interest expense + tax expense

= 25000 + 15000+10000 = 50000

Times interest earned = 50000 / 15000

= 3.33 times

f) Profit margin ratio = net income / sales

= 25000 / 425000

= 5.88%

g) Rate of return on common shareholders equity = net income / shareholders equity

= 25000 / 200000

= 12.5%

g) Earnings per share = net income / number of shares

= 25000 / 14000

= 1.78