Cash Accounts receivable Inventory.270,000 Accounts payable Prepaid expenses. .. Plant & equipment (net) Other assets . Total $1240,000 Total… $ 95,000 Notes payable (due in 6 155,000 m months) 40.000 60.000 Long-term liabilities 570,000 Capital stock, $5 par 90,000 Retained earnings 350.00 300 000 430.000 During the year the company earned a gross profit of $1,000,000 on sales of $2,900,000. Accounts receivable, nventory, and plant assets remained almost constant in amount throughout the year. Compute the following a) b) c) Current Ratio Quick Ratio Net Working Capital d) Debt Ratio e) Account Receivable Turnover (all sales were on credit) f) Inventory Turnover
III. Tom Flannery has developed a new recipe for fried chicken and plans to open a City. His father-in-law has agreed to invest $500,000 in the operation provided Tom can convince him will b take-out restaurant in Oklaboma e at least 20 percent of sales revenues. Tom estimated that total fixed expenses would be $24,00 per year that variable expenses would be approximately 40 percent of sales revenue Required
How much sales revenue must be eaed to produce profits equal to 20 percent o Prepare a contribution income statement to verify your answer. 2. If Tom plans on selling 12-piece buckets of chicken for $10 each, how many buckets must he sell to n a profit equal to 20 percent of sales? Twenty-five percent of sales? Prepare a contribution income statement to verify the second answer. 3. Suppose Tom’s father-in-law meant that the after-tax profit had to be 20 percent of sles revenue Under this assumption, how much sales revenue must be generated by Tom’s chicken business? (Assume that the tax rate is 40 percent.)
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