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Given the income statement and balance sheet for ABC Equipment Corporation, compute the ratios that


are also shown for the industry average. For each ratio, indicate whether ABC Equipment Corporation is

better (B) or worse (W) than the industry average. (SHOW YOUR WORK)

Income Statement

Sales (all credit) $4,500,000

Less: Cost of goods sold 3,000,000

Gross profit $1,500,000

Less: Selling and administrative expenses* 1,050,000

Operating profit (EBIT) $450,000

Less: Interest expense 56,250

Earnings before taxes (EBT) $393,750

Less taxes (25%) 98,438

Earnings after taxes (EAT) $295,312

Balance Sheet

Cash $255,050

Accounts receivable (net) 493,150

Inventory 250,000

Total current assets $998,200

Net plant and equipment 1,066020

Total Assets $2,064,220

Current liabilities 450,400

Long-term liabilities 450,350

Total liabilities 900,750

Common stock 387,800

Retained earnings 775,670

Total stockholders' equity $1,163.470

Total liabilities and stockholders' equity $2,064,220

Net profit margin? better or worse?

Return on assets?better or worse?

Return on common equity?better or worse?

Days sales outstanding?better or worse?

Inventory turnover ratio?better or worse?

Total assets turnover?better or worse?

Current ratio?better or worse?

Quick ratio?better or worse?

Debt ratio?better or worse?

Times interest earned?better or worse?

Top Answer

Net profit margin - Worse Return on assets - Better Return on common equity - Better... View the full answer

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