TCO B) Use the following current year financial statements for Abbee Aviation to perform ratio analysis. Abbee
Aviation Income Statement Revenue $4,400,000 Cost of goods sold 2,300,000 Gross profit 2,100,000 Operating expenses 750,000 Operating income (EBIT) 1,350,000 Interest expense 270,000 Earnings before taxes 1,080,000 Taxes (at 40%) 432,000 Net income 648,000
Abbee Aviation Balance Sheet Current assets Cash $2,780,000 Accounts receivable 670,000 Inventory 750,000 Total current assets 4,200,000 Non-current assets Fixed assets 5,200,000 Accumulated depreciation (2,400,000) Net fixed assets 2,800,000 Total assets $7,000,000 Current liabilities Accounts payable 890,000 Accrued liabilities 560,000 Total current liabilities 1,450,000 Non-current liabilities Bonds payable 3,000,000 Total liabilities 4,450,000 Shareholders' equity Common stock 550,000 Retained earnings 2,000,000 Total shareholders' equity 2,550,000 Total liabilities and shareholders' equity $7,000,000 (a) Calculate the firm’s operating return on assets. Assume that the firm’s year-end total assets balance for the prior year was $6 million. (b) Calculate the firm’s net working capital (c) What is the number of “accounts receivable days” for Abbee Aviation? Assume that the firm’s year-end accounts receivable balance for the prior year was $650,000. (d) What is the firm’s return on assets at the end of this year? Assume that the firm’s year-end total assets balance for the prior year was $6 million
Aviation Income Statement Revenue $4,400,000 Cost of goods sold 2,300,000 Gross profit 2,100,000 Operating expenses 750,000 Operating income (EBIT) 1,350,000 Interest expense 270,000 Earnings before taxes 1,080,000 Taxes (at 40%) 432,000 Net income 648,000
Abbee Aviation Balance Sheet Current assets Cash $2,780,000 Accounts receivable 670,000 Inventory 750,000 Total current assets 4,200,000 Non-current assets Fixed assets 5,200,000 Accumulated depreciation (2,400,000) Net fixed assets 2,800,000 Total assets $7,000,000 Current liabilities Accounts payable 890,000 Accrued liabilities 560,000 Total current liabilities 1,450,000 Non-current liabilities Bonds payable 3,000,000 Total liabilities 4,450,000 Shareholders' equity Common stock 550,000 Retained earnings 2,000,000 Total shareholders' equity 2,550,000 Total liabilities and shareholders' equity $7,000,000 (a) Calculate the firm’s operating return on assets. Assume that the firm’s year-end total assets balance for the prior year was $6 million. (b) Calculate the firm’s net working capital (c) What is the number of “accounts receivable days” for Abbee Aviation? Assume that the firm’s year-end accounts receivable balance for the prior year was $650,000. (d) What is the firm’s return on assets at the end of this year? Assume that the firm’s year-end total assets balance for the prior year was $6 million
