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Chapter 2: 7BP (page 48)
Given the following information, prepare an income statement for Jonas Brothers Cough Drops.
Selling and administrative expenses | $328,000 |
Depreciation expenses | 195,000 |
Sales | 1,660,000 |
Interest expenses | 129,000 |
Cost of goods sold | 560,000 |
Taxes | 171,000 |
The net income after tax arrives at $277,000.
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Discuss some financial variables that affect the price-earnings ratio
The Denver Corporation has forecast the following sales for the first seven months of the year:
January | \(15,000 | May | \)15,000 |
February | 17,000 | June | 21,000 |
March | 19,000 | July | 23,000 |
April | 25,000 |
Monthly material purchases are set equal to 40 percent of forecast sales for the next month. Of the total material costs, 50 percent are paid in the month of purchase and 50 percent in the following month. Labor costs will run \(4,500 per month, and fixed overhead is \)4,500 per month. Interest payments on the debt will be $3,500 for both March and June. Finally, the Denver salesforce will receive a 3.00 percent commission on total sales for the first six months of the year, to be paid on June 30.
Prepare a monthly summary of cash payments for the six-month period from January through June. (Note: Compute prior December purchases to help get total material payments for January.)
Jolie Foster Care Homes Inc. shows the following data:
Year | Net Income | Total assets | Stockholder鈥檚 Equity | Total debts |
20X1 | \(155,000 | \)2,390,000 | \(761,000 | \)1,629,000 |
20X2 | 191,000 | 2,700,000 | 966,000 | 1,734,000 |
20X3 | 208,000 | 2,730,000 | 1,770,000 | 960,000 |
20X4 | 192,000 | 2,470,000 | 2,220,000 | 250,000 |
a. Compute the ratio of net income to total assets for each year and commenton the trend.
The Harding Company manufactures skates. The company鈥檚 income statement for 20X1 is as follows:
HARDING COMPANY Income Statement For the year ended December 31, 20X1 | |
Sales (10,500 skates at \(60 each) | \)630,000 |
Less: variable costs (10,500 tires at \(25) | 262,500 |
Less: fixed cost | 200,000 |
Earnings before interest and taxes (EBIT) | \)167,500 |
Interest expenses | 62,500 |
Earning before taxes (EBT) | \(105,000 |
Income tax expenses (30%) | 31,500 |
Earning after taxe (EAT) | \)73,500 |
Given this income statement, compute the following:
c. Degree of combined leverage.
Why is trend analysis helpful in analyzing ratios?
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