GROUP G: ANSWER KEY

Problem 1

1.1 Common-size Analysis and trend analysis

Jaz Company

Income Statement

For the Year Ended December 31, 2022

2022 Percent

Sales 12,300,000 101.49%

Less: Returns and Allowances 180,000 1.49%

Net Sales 12,120,000 100.00%

Less: Cost of Sales

Merchandise Inventory, 1,200,000 9.90%

December 31, 2021

Add: Purchases 3,800,000 31.35%

Cost of Goods Available for Sale 5,000,000 41.25%

Less: Merchandise Inventory, 950,000 7.84%

December 31, 2022

Cost of Sales 4,050,000 33.42%

Gross Profit 8,070,000 66.58%

Less: Expenses

Administrative Expenses 3,800,000 31.35%

Distribution Cost 2,500,000 20.63%

Interest Expense 150,000 1.24%

Total Expenses 6,450,000 53.22%

Net Income 1,620,000 13.37%

1.2

Morrison Pet Supple Company

Statement of Financial Position

December 31

Increase (Decrease)

Account Titles 2022 2021 Amount Percent

Assets

Cash 15,500 10,000 5,500 55%

Accounts Receivable 6,300 6,200 100 1.61%

Prepaid rent 4,000 3,500 500 14.29%

Inventory 7,500 8,000 (500) (6.25)

Supplies 800 500 300 60%

Land 25,000 25,000 - -

Building 15,000 15,000 - -

Accumulated (12,000) (9,000) (3000) (33.33%)

Depreciation-Building

Equipment 10,000 9,000 1000 11.11%

Accumulated (5,400) (3,600) 1,800 50%

Depreciation-Equipment

Total Assets 66,700 64,600 2,100 3.25%

Liabilities

Notes Payable 8,000 9,000 (1,000) (11.11%)

Accounts Payable 4,500 4,000 500 12.5%

Salaries and Wages 1,200 1,200 - -

Payable

Unearned Pet Supplies 250 250 - -

Total Liabilities 13,950 14,450 (500) (3.46%)

Stockholder's Equity

Common Stock 35,000 33,000 2,000 (6.06%)

Retained Earnings 17,750 17,150 600 3.50%

Total Stockholder's Equity 52,750 50,150 2,600 5.18%

Total Liabilities and 66,700 64,600 2,100 3.25%

Stockholder's Equity
Problem 2: Ratios

2.1

Receivables turnover = Revenue/Average receivables

= 45,349,943/[(4,468,392 + 4,972,722)/2]

= 45,349,943/4,720,557

= 9.6069 times, or 9.6 rounded

DSO = Number of days in period/Receivables Turnover

= 365/9.6

= 38.0 days

2.2

Current ratio = Current Ratio

Current Liabilities

Current Assets = 100,000 + 80,000 + 50,000 + 2,000 + 20,000 + 100,000

= 352,000

Current Liabilities = 80,000 + 40,000 + 20,000 + 30,000

= 170,00

Current Ratio = 352,000

170,000

= 2.07 or 207%
Problem 3: Credit Analysis

EBITDA Revenue 6,000,000 EBIT Revenue 6,000,000

COGS (3,500,000) COGS (3,500,000)

GenEx (300,000) GenEx (300,000)

EBITDA 2,200,000 DepEx (200,000)

EBIT 2,000,000

1. Total Debt 4,000,000 1.81

EBITDA 2,200,000

2. EBITDA 2,200,000 0.3667

Total revenue 6,000,000 36.67%

3. EBIT 2,000,000 0.3333

Total revenue 6,000,000 33.33%