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The balance sheet and income statement for Chico Electronics are reproduced below (tax rate is 40%).
CHICO ELECTRONICS
Balance Sheet ($ thousands)
As of December 31
Assets
Current assets
Cash
$ 683
$325
Accounts receivable
1,490
3,599
Inventories
1,415
2,423
Prepaid expenses
15
13
Total current assets
3,603
$6,360
Property, plant and equipment, net
1,066
$1,541
Other assets
123
157
Total assets
$4,792
$8,058
Liabilities and Shareholders" Equity
Current liabilities
Notes payable to bank
$ -
$875
Current portion of long-term debt
38
$116
Accounts payable
485
933
Estimated income tax liability
588
472
Accrued expenses.
576
586
Customer advance payments
34
963
Total current liabilities
1,721
$3,945
Long-term debt
122
179
Other liabilities
81
131
Total liabilities
1,924
4,255
Shareholders" equity
Common stock, $1.00 par value; 1,000,000 shares authorized;
550,000 and 829,000 outstanding, respectively
Preferred stock, Series A 10%; $25 par value; 25,000 authorized
550
829
20,000 and 18,000 outstanding, respectively
500
450
Additional paid-in capital
575
Retained earnings
1,368
1,949
Total shareholders" equity
2,868
3,803
Total liabilities and shareholders" equity
Income Statement ($ thousands)
For Years Ending December 31
Year 4
Year 5
Net sales
7,570
$12,065
Other income, net
$261
345
Total revenues.
7,831
12,410
Cost of goods sold
4,850
8048
General, administrative, and
1,531
2025
marketing expense
Interest expense
22
78
Total costs and expenses
6403
10151
Net income before tax
1,428
2,259
Income tax
628
994
Net income
$800
$1,265
Required:
Compute and interpret the following financial ratios of the company for Year 5:
a. Acid-test ratio.
b. Return on assets.
c. Return on common equity.
d. Earnings per share.
e. Gross profit margin ratio.
f. Times interest earned.
g. Days to sell inventory.
h. Long-term debt to equity ratio.
i. Total debt to equity.
j. Sales to end-of-year working capital.
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