Question

The following information pertains to Ortiz Company. Assume that all balance sheet amounts represent both average...

The following information pertains to Ortiz Company. Assume that all balance sheet amounts represent both average and ending balance figures. Assume that all sales were on credit.

Assets

Current assets                                                                                          $ 95,000

Property, plant and equipment                                                                210,000

            Total Assets                                                                                 $305,000

Liabilities and Stockholders’ Equity

Current liabilities                                                                                    $ 50,000

Long-term liabilities                                                                                    95,000

Stockholders’ equity—common                                                             160,000

            Total Liabilities and Stockholders’ Equity                                 $305,000

Income Statement

Sales                                                                                                      $ 110,000

Cost of goods sold                                                                                       66,000

Gross profit                                                                                                 44,000

Operating expenses                                                                                     30,000

            Net income                                                                                  $ 14,000

Number of shares of common stock outstanding                                          6,000

Using the above information, calculate the following:

            Current ratio               _______________

    

            Profit Margin             _______________

            Debt to total assets     _______________

           

            Return on Assets        _______________

            Earnings per Share     _______________

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Answer #1

Calculation of current ratio:

given, current assets = $95000

current liabilities = $50000

Current ratio = Current assets/current liabilities

= 95000/50000

= 1.9

Calculation of profit margin:

given, Net income = $14000

Sales = $110000

Profit margin = Net income/ Sales

=14000/110000

= 0.127 0r 12.7%

Calculation of debt to total assets:

Given, Debt = $95000

Total assets = $305000

Debt/total assets = 95000/305000

= 0.311

Calculation of Return on assets:

given, Net income = $14000

Average total assets = $305000

Return on assets = Net income/Average total assets

  = 14000/305000

= 0.0459 or 4.59%

Calculation of Earnings per share:

given, Net income = $14000

No. of shares outstanding = 6000

Earnings per share = Net income/No.of shares outstanding

= 14000/6000

= 2.33

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