Below are the balance sheet and income statement for Happy Hamburger Company.
| Happy Hamburger Company | ||||
| Balance Sheet as of December 31, 20XX | ||||
Assets | Liabilities and Shareholder Equity | |||
Cash | 78,000 | Accounts payable | 136,000 | |
Accounts Receivable | 336,500 | Current portion of debt | 82,500 | |
Inventories | 225,000 | Other current liabilities | 114,000 | |
Total current assets | 639,500 | Total current liabilities | 332,500 | |
Net fixed assets | 310,000 | Long-term debt | 252,000 | |
Total assets | 949,500 | Total Liabilities | 584,500 | |
Common equity | 365,000 | |||
Total Liabilities & Equity | 949,500 | |||
| Happy Hamburger Company | |
| Income Statement for the year ending December 31, 20XX | |
| Sales | 1,704,560 |
| Cost of goods sold | 1,489,000 |
| Selling, general and administrative expenses | 152,000 |
| Earnings before interest and taxes (EBIT) | 63,560 |
| Interest expense | 26,200 |
| Earnings before taxes (EBT) | 37,360 |
| Federal and state income taxes (40%) | 14,944 |
| Net Income | 22,416 |
Required:
- Calculate the following ratios for the company.
- Explain whether the company is doing better or worse than the industry average for each ratio.
Happy | Industry | |
| Current ratio | 1.7 | |
| Days sales outstanding (based on 365 day year) | 36 days | |
| Inventory turnover | 7.3 | |
| Fixed asset turnover | 12.1 | |
| Total asset turnover | 3.00 | |
| Return on sales | 3.20% | |
| Return on assets | 3.60% | |
| Return on equity | 9.00% | |
| Debt ratio | 71% |
Use an Excel spreadsheet for your answers.
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