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Problem 9-19Joseph Berio is a loan officer with the First Ba

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Problem 9-19Joseph Berio is a loan officer with the First Bank of Tennessee. Red Brick, Inc., a major producer of masonry products, has applied for a short-term loan. Red Brick supplies building material throughout the southern states, with brick plants located in Tennessee, Alabama, Georgia, and Indiana.The firm’s income statement and balance sheet are given below. The third table presents both a ratio analysis of Red Brick’s previous year’s financial statements and the industry averages of the ratios.Red Brick Income Statement(for the period ending December 12/31/20X1)Sales$197,000,000Cost of goods sold186,000,000Administrative expenses21,000,000Operating income$-10,000,000Interest expense9,000,000Taxes300,000Net income$-19,300,000Red Brick Balance Sheet as of 12/31/20X2AssetsLiabilities and Stockholders’ EquityCash$700,000Accounts payable$42,000,000Accounts receivable33,000,000*Notes payable7,000,000Inventory77,700,000?ong-term debt53,000,000Plant and equipment128,000,000Stockholders’ equity137,400,000$239,400,000$239,400,000*70% of sales are on credit.?Previous year’s inventory was $58,600,000.Company’s RatiosIndustry(Previous Year)AverageCurrent ratio2.1:12.1:1Quick ratio0.7:10.9:1Inventory turnover4.6×4.6xAverage collection period54 days46 daysDebt ratio (debt/total assets)32%43%Times-interest-earned-1.13.7Return on equity-15.5%14.0%Return on assets-8.8%10.3%Operating profit margin-3.9%15.2%Net profit margin-7.5%8.8%To help decide whether to grant the loan, compute the following ratios and compare the results with the company’s previous year ratios and industry averages. Assume there are 365 days in a year. Do not round intermediate calculations. Round your answers to two decimal places.Current ratio of?times is?the industry average and?the ratio in the previous year.Quick ratio of?times is?the industry average and?the ratio in the previous year.Inventory turnover ratio of?is?the industry average and?the ratio in the previous year.Average collection period of?days is?the industry average and?the ratio in the previous year.Debt ratio of?? is?the industry average and?the ratio in the previous year.Times-interest-earned ratio of?is?the industry average and?the ratio in the previous year.Return on equity ratio of?? is?the industry average and?the ratio in the previous year.Return on assets ratio of?? is?the industry average and?the ratio in the previous year.Operating profit margin ratio of?? is?the industry average and?the ratio in the previous year.Net profit margin ratio of?? is?the industry average and?the ratio in the previous year.AccountingBusinessFinancial AccountingBUSINESS 205

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