Agriculture Reference
In-Depth Information
Table 10.5
ABC farm supply store condensed balance sheet (in dollars)
Assets
Current Assets:
— Cash
171,000
— Accounts receivable
698,000
— Inventory
897,000
Total current assets
1,766,000
Total fi xed assets
2,482,000
Total assets
4,248,000
Liabilities and Owner's Equity
Current Liabilities:
Accounts payable
483,000
Notes payable
565,000
Total current liabilities
1,048,000
Long-term liabilities
2,000,000
Total liabilities
3,048,000
Owner's contribution
1,000,000
Retained earnings
200,000
Total Owner's Equity
Total liabilities and owner's equity
1,200,000
4,248,000
Table 10.6
ABC farm supply store condensed income statement (in dollars)
Net Sales
5,215,000
Cost of goods sold
3,285,450
Gross margin
1,929,550
Operating expenses
1,202,423
Administrative expenses
320,646
Other expenses
80,161
Total operating expenses
1,603,230
Net operating income
326,320
Interest expense
152,400
Net income before taxes
173,920
Income tax
42,480
Net income after taxes
131,440
Questions
1.
Follow the step-by-step formula shown in
Figure 10.1
and develop a profi tability analy-
sis model for ABC Farm Supply Store. What is the fi rm's ROE?
2.
When the profi tability analysis model has been completed, calculate and interpret at
least one profi tability, liquidity, solvency, and effi ciency ratio, using the information in
Tables 10.5
and
10.6.
3.
What are some strengths and weaknesses of the ABC Farm Supply Store identifi ed by your
ratio analysis? What other information would be helpful to you in answering this question?
Reference
Truth in Lending , Regulation Z , Supervision Manual
, Board of Governors of the Federal Reserve
System . Washington, DC , 2011 .
