Reference no: EM131123456

Bike-With-Us Corporation, a specialty bicycle parts replacement venture, was started last year by two former professional bicycle riders who had substantial competitive racing experience, including the Tour de France. The two entrepreneurs borrowed $50,000 from members of their families, and each put up $30,000 in equity capital. Retail space was rented, and $60,000 was spent for fixtures and store equipment. Following is the abbreviated income statement and balance sheet information for the Bike-With-Us Corporation after one year of operation.

BIKE-WITH-US CORPORATION INCOME STATEMENT

Sales ........... $325,000

Operating costs ...... 285,000

Depreciation ......... 10,000

Interest ........... 5,000

Taxes ........... 6,000

Cash ........... $1,000

Receivables ......... 30,000

Inventories .......... 50,000

Fixed assets, net ........ 50,000

Payables ........... 11,000

Accruals .......... 10,000

Long-term loan ....... 50,000

Stockholders' equity ..... 60,000

A. Prepare an income statement and a balance sheet for the Bike-With-Us Corporation using only the information provided above.

B. Calculate the current ratio, quick ratio, and NWC-to-total-assets ratio.

C. Calculate the total-debt-to-total-assets ratio, debt-to-equity ratio, and interest coverage.

D. Calculate the net profit margin, sales-to-total-assets ratio, and the return on assets.

E. Calculate the equity multiplier. Combine this calculation with the calculations in Part D to show the ROE model with its three components.