Question

Common-Size Balance Sheet		2016
Cash and marketable securities	$	490	1.5	%
Accounts receivable		6,000	18.2
Inventory		9,490	28.8
Total current assets	$	15,980	48.4	%
Net property, plant, and equipment		17,020	51.6
Total assets	$	33,000	100.0	%
Accounts payable	$	7,210	21.8	%
Short-term notes		6,790	20.6
Total current liabilities	$	14,000	42.4	%
Long-term liabilities		6,970	21.1
Total liabilities	$	20,970	63.5	%
Total common shareholders’ equity		12,030	36.5
Total liabilities and shareholders’ equity	$	33,000	100.0	%

Common-Size Income Statement		2016
Revenues	$	29,980	100.0	%
Cost of goods sold		(19,960)	66.6
Gross profit	$	10,020	33.4	%
Operating expenses		(8,030)	26.8
Net operating income	$	1,990	6.6	%
Interest expense		(920)	3.1
Earnings before taxes	$	1,070	3.6	%
Income taxes		(389)	1.3
Net income	$	681	2.3	%

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.

Answer 1

Req a:
Cash in hand relative to Total assets: 1.50% of total assets
Req b:
Assets financed from Short term debts (i.e. Current liabilities): 42.40%
Assets Financed from Long term debts: 21.10%
Req c:
Proportion of revenue left over after all expenses: 2.30% of revenue
Req d:
Cost of goods sold constitutes 66.6% of total revenue which is considered as major cost of firm.
Operating expense constitutes 26.80% of total revenue
Interest expense constitutes 3.10% of total revenue