The La Hermosa Company asked you to interpret the following ratios provided by its accountant: Acid-test ratio 15 tol Times interest earned 8 times Gross margin ratio 40% Inventory turnover 6 times Debt to equity ratio Itol Ratio of operating expenses to sales 20% The gross profit for the year ended December 31, 20CY was 1,200,000. Total stockholders’ equity on Dec. 31, 20CY amounted to 1,800,000. The beginning balance of merchandise inventory, was 400,000. The company’s long-term liabilities consisted of bonds payable with interest at 10%. You decided to reconstruct the company’s financial statements based on the limited information given to serve as basis for further analysis. REQUIRED: - Compute for the following: 1. Total Sales 2. Ending Inventory 3. Total Purchases 4. Operating Expenses 5. Operating Income 6. Interest Expense 71. Quick Assets 8. Total current assets 9. Bonds payable 10. Total current liabilities / Scanned with CamScannerEXAMPLE PROBLEM 1: Amounts are expressed in PhPesos. NOTE: PY means Prior Year; CY means Current Year. The following are the Financial Position and Income Statement data of Balance Sheet Accounts (December 31) Cash Marketable Securities Accounts Receivable, net Inventory Land Building, net Machinery and Equipment, net Goodwill Deferred Charges Notes Payable, Trade Accounts Payable, Trade Expenses Payable Long-term Notes Payable 15% Preferred Stock, P100 par Common Stock, Pl0 par Retained Earnings CY Income Statement Accounts Sales Sales Returns and Allowances Inventory, December 31, 20CY. Inventory, December 31, 20PY Purchases Selling Expenses Administrative Expenses (Including Depreciation of 250,000) + Interest on Long-term Notes Income Taxes, 30% Additional Information: 1. Dividends paid on preferred stock Dividends paid on common stock 2. 3. Market price REQUIREMENTS: 1 per share on common stock 20PY 150,000 850,000 500,000 750,000 500,000 550,000 1,700,000 400,000 100,000 100,000 610,000 40,000 2,500,000 500,000 1,500,000 250,000 20CY 283,000 1,000,000 1,000,000 500,000 500,000 500,000 1,500,000 400,000 90,000 150,000 790,000 60,000 2,250,000 500,000 1,500,000 523,000 5,250,000 250,000 500,000 750,000 2,750,000 400,000. 600,000 250,000 75,000 177,000 18 Prepare comparative Statement of Financial Position for 20PY and 20CY, showing currency and % increases or decreases (Horizontal Analysis). 2; Prepare C 5 Prepare Comprehensive Income Statement for the year ended December a ar A , - 31, 20CY with commonsize percentages (Vertical Analysis). 3. Prepare comparative common-size Statement of Financial Position at December 31, 20PY and 20CY (Vertical Analysis). Scanned with CamScannerREQUIREMENTS, San rE DO eaosce 2B emo onge Evaluate the hortterm solvency for 20CY by computing: Working Current Acid-test Ratio Cash Flow from Operations to Current Liabilities Receivable Turnover Age of Receivables (Use 360 days) Inventory ‘Turnover Days’ Supply in Inventory Working Capital Turnover Current Asset Turnover Evaluate the firm's longterm solvency for 20CY by computing: Debt to Equity Ratio Cash Flow from Operations to Total Liabilities Times Interest Earned Times preferred Dividends earned. Evaluate the firm’s operational efficiency for 20CY by computing: Gross Margin Ratio Profit Margin Ratio Return on Total Assets Return on Owners’ Equity Asset Turnover Ratio Evaluate the firm’s profitability for 20CY by computing: Return on Common Stockholders’ Equity. Earnings Per Share (EPS) Price-earnings Ratio Pay-out Ratio to Common Shares Dividend Yield Per Share on Common Stock Make an investment analysis for 20CY by computing: Equity Ratio Creditors Equity to Total Book Value Per Share on Assets Common Stock Scanned with CamScanner