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Perform a vertical analysis of the income statement

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Reference no: EM131953307

Given the profit loss (income statement) and balance sheet for Sam's Sandwich Delivery (Table 4-8), answer the following:

a. Calculate the following ratios: current, quick, accounts receivable turnover, fixed asset turnover.

b. Using the inventory figure on the balance sheet as average inventory, calculate the inventory turnover ratio.

c. Calculate the debt-to-equity ratio, debt-to-total asset ratio, and operating profit margin ratio.

d. Perform a vertical analysis of the income statement.

e. Perform a vertical analysis of the balance sheet.

f. Based on your analysis, would you consider investing in Sam's Sandwich Delivery?

Table 4-8 Financial Statements for Sam's Sandwich Delivery
Profit Loss (Income Statement) for Six Months Ending 06-30-2013






Revenues




Retail Sales
 $68,283


Wholesale Sales
 104,417

Total Revenues

 $172,700
Cost of Sales
   52,067

Gross Profit

 $120,633

Total Operating Expenses  111,117

Operating Profit

 $    9,516
Other Income/Expenses




Interest Income
         41


Interest Expense
       (651)


Depreciation-Store Equipment        (292)

Total Other Income/Expenses
        (902)
Net Profit


 $   8,614






Balance Sheet as of 06-30-2013






Assets



Current Assets




Change Fund

 $       569

Cash in Bank-Checking

       8,612

Cash in Bank-Savings

       9,622

Accounts Receivable

       6,843

Inventories

       2,607
Total Current Assets


 $ 28,253






Fixed Assets




Furniture and Fixtures
     4,296


  Less: Accum Depreciation      4,110          186

Equipment
   68,293


  Less: Accum Depreciation    67,725          568

Transportation Equipment    31,168


  Less: Accum Depreciation    11,571      19,597
Total Fixed Assets


 $ 20,351






Total Assets


 $ 48,604






Current Liabilities




Accounts Payable Trade

       6,208

Accrued Payroll Taxes

       3,464

Accrued Sales Taxes

         987
Total Current Liabilities


 $ 10,659
Long-Term Liabilities




Auto Loans Payable

     18,626

  Total Long-Term Liabilities

 $ 18,626

  Total Liabilities


 $ 29,285
Stockholder's Equity




Common Stock
   83,081


Retained Earnings
  (72,376)


Net Profit/Loss
     8,614

Total Equity


    19,319






Total Liabilities and Equity


 $ 48,604






Verified Expert

This task is divided into two part. Both the part describes how both the part will be treated on general basic accounting concepts. Most of the question deals with selecting the right choice among various options and having a general understanding of accounting concepts.

Reference no: EM131953307

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