Question

Use the​ common-size financial statements found​ here:

Common-Size Balance Sheet		2016
Cash and marketable securities	$	460	1.4	%
Accounts receivable		6,040	18.3
Inventory		9,480	28.8
Total current assets	$	15,980	48.5	%
Net property, plant, and equipment		16,960	51.5
Total assets	$	32,940	100.0	%
Accounts payable	$	7,220	21.9	%
Short-term notes		6,790	20.6
Total current liabilities	$	14,010	42.5	%
Long-term liabilities		7,020	21.3
Total liabilities	$	21,030	63.8	%
Total common shareholders’ equity		11,910	36.2
Total liabilities and shareholders’ equity	$	32,940	100.0	%

Common-Size Income Statement		2016
Revenues	$	29,960	100.0	%
Cost of goods sold		(19,960)	66.6
Gross profit	$	10,000	33.4	%
Operating expenses		(7,970)	26.6
Net operating income	$	2,030	6.8	%
Interest expense		(920)	3.1
Earnings before taxes	$	1,110	3.7	%
Income taxes		(404)	1.3
Net income	$	706	2.4	%

to respond to your​ boss' request that you write up your assessment of the​ firm's financial condition.​ Specifically, write up a brief narrative that responds to the following​ questions:

a. How much cash does Patterson have on hand relative to its total​ assets?

b. What proportion of​ Patterson's assets has the firm financed using​ short-term debt?​ Long-term debt?

c. What percent of​ Patterson's revenues does the firm have left over after paying all of its expenses​ (including taxes)?

d. Describe the relative importance of​ Patterson's major expense​ categories, including cost of goods​ sold, operating​ expenses, and interest expenses.

a. How much cash does Patterson have on hand relative to its total​ assets? The cash Patterson has on hand relative to its total assets is____%. ​(Round to one decimal​ place.)

Answer 1

Answer a.

The cash Patterson has on hand relative to his assets is 1.4%

Answer b.

The proportion of Patterson’s assets that has been financed using short-term debt is 20.6%
The proportion of Patterson’s assets that has been financed using long-term debt is 21.3%

Answer c.

The percent of Patterson’s revenues left over after paying all of his expenses including taxes is 2.4%

Answer d.

The cost of goods sold represents 66.6% of Patterson’s sales.
The operating expenses represents 26.6% of Patterson’s sales.
The interest expense represents 3.1% of Patterson’s sales.