Finance Accounting

The balance sheet and income statement shown below are for Kryloc Inc. You will find that the firm has no amortization charges. It also does not lease any assets and none of its debt must be retired during the next 5 years. The notes payable will be rolled over.

Balance Sheet (Millions of $)

Assets 2010

Cash and securities $ 2,500

Accounts receivable 11,500

Inventories 16,000

Total current assets $30,000

Net plant and equipment $20,000

Total assets $50,000

Liabilities and Equity

Accounts payable $ 9,500

Notes payable 7,000

Accruals 5,500

Total current liabilities $22,000

Long-term bonds $15,000

Total debt $37,000

Common stock $ 2,000

Retained earnings 11,000

Total common equity $13,000

Total liabilities and equity $50,000

Income Statement (Millions of $) 2010

Net sales $87,500

Operating costs except depreciation 81,813

Depreciation 1,531

Earnings bef interest and taxes (EBIT) $ 4,156

Less interest 1,375

Earnings before taxes (EBT) $ 2,781

Taxes 973

Net income $ 1,808

Other data:

Shares outstanding (millions) 500.00

Common dividends $632.73

Int rate on notes payable & L-T bonds 6.25%

Federal plus state income tax rate 35%

Year-end stock price $43.39

Assignment Questions

i. What is the firm's current ratio?

Current ratio= current assets/current liabilities

30000/22000=1.364

ii. What is the firm's quick ratio?

Quick ratio= (current assets-inventories)/current liabilities

30000-16000/22000=.64

iii. What is the firm's “days sales outstanding” (DSO)? Assume a 365-day year for this calculation.

DSO= AR/(Annual Sales/365 days)

11500/(87500/365 days)=47.97

iv. What is the firm's total assets turnover?

Total asset turnover=net sales/average total assets

87500/50000=1.75

v. What is the firm's inventory turnover ratio?

Inventory turnover= COGS/average inventory

81.813/16000=5.12

vi. What is the firm's TIE?

TIE= net income+ interest expense+ income tax expense)/interest expense...