1. Calculate the following ratios. (Use 365 days in a year. Round your intermediate calculations and final answers to 2 decimalplaces.)CavalierRatioRoyale CompanyCompanyTests of Profitability:1. Net Profit Margin%%2. Gross Profit Percentage%%3. Fixed Asset Turnover4. Return on Equity%5. Earnings per Share6. Price/Earnings RatioTests of Liquidity:7. Receivables Turnover7. Days to Collect8. Inventory Turnover8. Days to Sell9. Current RatioTests of Solvency:10. Debt-to-Assets The financial statements for Royale and Cavalier companies are summarized here:CavalierRoyale CompanyCompanyBalance Sheet$ 33,00063,000126,000566,000148,000$ 53,00024,00041,000176,00054,000$ 348,000CashAccounts Receivable, NetInventoryEquipment, NetOther AssetsTotal Assets$ 936,000$ 136,000206,000488,00058,00048,000$ 936,000$ 31,00071,000218,00012,00016,000$ 348,000Current LiabilitiesNotes Payable (long-term)Common Stock (par $20)Additional Paid-In CapitalRetained EarningsTotal Liabilities and Stockholders' EquityIncome Statement$ 824,000488,000248,000$ 88,000$ 304,000158,000103,000$ 43,000Sales RevenueCost of Goods SoldOther ExpensesNet IncomeOther DataPer share price at end of yearSelected Data from Previous Year$ 12.00$ 20.00Accounts Receivable, NetNotes Payable (long-term)Equipment, NetInventoryTotal Stockholders' Equity$ 55,000206,000566,000103,000594,000$ 22,00071,000176,00046,000246,000These two companies are in the same business and state but different cities. Each company has been in operation for about 10 years.Both companies received an unqualified audit opinion on the financial statements. Royale Company wants to borrow $83,000 cashand Cavalier Company is asking for $38,000. The loans will be for a two-year period. Both companies estimate bad debts based on anaging analysis, but Cavalier has estimated slightly higher uncollectible rates than Royale. Neither company issued stock in the currentyear. Assume the end-of-year total assets and net equipment balances approximate the year's average and all sales are on account.

1)Calculation of Net profit margin as follows:- Net profit =Net income / Sales revenue x 100

1. Calculate the following ratios. (Use 365 days in a year. Round your intermediate calculations and final answers to 2 dec places.) Cavalier Ratio Royale Company Company Tests of Profitability: 1. Net Profit Margin % % 2. Gross Profit Percentage % % 3. Fixed Asset Turnover

1. Calculate the following ratios. (Use 365 days in a year. Round your intermediate calculations and final answers to 2 dec places.) Cavalier Ratio Royale Company Company Tests of Profitability: 1. Net Profit Margin % % 2. Gross Profit Percentage % % 3. Fixed Asset Turnover

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter16: Financial Statement Analysis

Section: Chapter Questions

Problem 4PB

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