Question: Tabor Company has just prepared the following
Tabor Company has just prepared the following comparative annual financial statements for the current year:
Required:
1. For the current year, compute the turnover, liquidity, and solvency ratios in Exhibit 13.3. Assume cash flows from operating activities were $14,600 and cash paid for interest was $3,800.
2. Comment on the turnover ratios. Any concerns?
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TABOR COMPANY Comparative Income Statement For the Years Ended December 31 Current Year Last Year Sales revenue (one-half on credit) Cost of goods sold $110,000 52,000 $99,000 48,000 Gross profit Expenses (including $4,000 interest expense each year) $ 58,000 40,000 $51,000 37,000 $ 18,000 5,400 Pretax income $14,000 Income tax expense (30%) 4,200 Net income $ 12,600 $ 9,800 TABOR COMPANY Comparative Balance Sheet At December 31 Current Year Last Year Assets Cash $ 49,500 $ 18,000 37,000 25,000 Accounts receivable 32,000 Inventory 38,000 Property & equipment (net) 95,000 105,000 Total assets $206,500 $193,000 Liabilities $ 42,000 $ 35,000 Accounts payable Income taxes payable Note payable, long-term 1,000 500 40,000 40,000 Stockholders' equity Capital stock ($5 par value) Retained earnings 90,000 90,000 33,500 27,500 Total liabilities and Stockholders' equity $206,500 $193,000
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> What do solvency ratios focus on? What is an example of a solvency ratio and how is it computed? Exhibit 13.3:
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