P2-10.the financial statements of access corporation for the year

P2-10.The financial statements of Access Corporation for the year ended December 31, 2012, follow.

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Access Corporation

Income Statement

For the Year Ended December 31, 2012

__________________________________________________________________________________________________________     .

Sales revenue

 

$160,000

Less: Cost of goods solda

 

  106,000

Gross profit

 

$ 54,000

Less operating expenses:

 

 

  Selling expense

$16,000

 

  General and administrative expense

10,000

 

  Lease expense

1,000

 

  Depreciation expense

 10,000

 

    Total operating expenses

 

  37,000

Operating profit

 

$17,000

Less: Interest expense

 

    6,100

Net profit before taxes

 

$10,900

Less: Taxes @ 40%

 

    4,360

Net profits after taxes

 

$  6,540

 

aAccess Corporation’s annual purchases are estimated to equal 75 percent of cost of goods sold.

 

Access Corporation

Balance Sheet

As of December 31, 2012

Assets

Liabilities and Stockholders’ Equity

   Cash

$     500

   Accounts payable

$ 22,000

   Marketable securities

1,000

   Notes payable

   47,000

   Accounts receivable

25,000

      Total current liabilities

$ 69,000

   Inventories

    45,500

Long-term debt

   22,950

      Total current assets

$  72,000

Total liabilities

$ 91,950

Land

$  26,000

Common stock a

31,500

Buildings and equipment

$  90,000

Retained earnings

   26,550

Less: Accumulated depreciation

    38,000

Total liabilities and stockholders’

 

Net fixed assets

$  78,000

equity

$150,000

Total assets

$150,000

 

 

           

                  a The firm’s 3,000 outstanding shares of common stock closed 2012 at a price of $25 per share.

 

a.   Use the preceding financial statements to complete the following table. Assume that the industry averages given in the table are applicable for both 2011 and 2012.

b.   Analyze Access Corporation’s financial condition as it relates to (1) liquidity, (2) activity, (3) debt, (4) profitability, and (5) market value. Summarize the company’s overall financial condition.

 

 

 

 

           

Access Corporation’s Financial Ratios

 

 

Industry Average

Actual
Ratio 2011

Actual
Ratio 2012

Current ratio

1.80

1.84

 

Quick (acid-test) ratio

.70

.78

 

Inventory turnover

2.50

2.59

 

Average collection perioda

37 days

36 days

 

Average payment perioda

72 days

78 days

 

Debt-to-equity ratio

50%

51%

 

Times interest earned ratio

3.8

4.0

 

Gross profit margin

38%

40%

 

Net profit margin

3.5%

3.6%

 

Return on total assets (ROA)

4.0%

4.0%

 

 

 

 

 

Based on a 365-day year and on end-of-year figures.

 

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