Calculate the key financial ratios for Strident Marks
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Strident Marks, Inc.
Income Statement
For the Year Ended December 31, 2006
Revenue
Net Sales 8,994,000
Cost of Goods Sold 3,759,600
Gross Margin 5,234,400
Expenses
Selling General & Administrative 1,245,900
Depreciation Expense 350,000 1,595,900
Income Before Interest and Taxes 3,638,500
Interest Expense 250,000
Income Before Taxes 3,388,500
Income Tax Expense 1,016,550
Net Income 2,371,950
Beginning Retained Earnings 1,500,000
Dividends 2,400,000
Ending Retained Earnings 1,471,950
Second Page
Strident Marks, Inc.
Balance Sheet
December 31, 2006
Assets
Current Assets
Cash 1,336,950
Accounts Receivable 900,000
Inventories 7,500,000
Total current assets 9,736,950
Property, Plant & Equipment 625,000
less Accumulated Depreciation 111,000
Net Property, Plant & Equipment 514,000
Total Assets 10,250,950
Liabilities & Shareholder's Equity
Accounts Payable 420,000
Accrued Liabilities 484,000
Interest Payable 2,500,000
Income Taxes Payable 900,000
Dividends Payable 2,400,000
Total current liabilities 6,704,000
Long-term debt 1,750,000
Total liabilities 8,454,000
Common stock at par 425,000
Retained Earnings 1,471,950
Treasury stock - at cost -100,000
Total Shareholders Equity 1,796,950
Total liabilities and shareholders equity 10,250,950
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Solution Summary
The solution calculates the financial ratios for Strident Marks Inc based on their income statement.
Solution Preview
In financial analysis, we need qualitative information and try to read between the numbers. Ratio analysis can also help us to check whether a business is doing better this year than it was last year; and it can tell us if our business is doing better or worse than other businesses doing and selling the same things. In other words it helps in inter firm and intra firm comparison.
We can use ratio analysis to try to tell us whether the business
1. Is profitable
2. Has enough money to pay its bills
3. Could be paying its employees higher wages
4. Is paying its share of tax
5. Is using its assets efficiently
6. Has a gearing problem
7. Is a candidate for being bought by another company or investor
(www.bized.ac.uk)
The following ratios will help in knowing the stability:
Debt Management ratios measure the utilization of ...
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