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Question E:
Kaj and the venture investors are also interested in how efficiently Scandi is able to convert its equity investment, as well as the venture ’ s total assets, into sales. Calculate several ratios that combine data from the income statements and balance sheets and compare what has happened between the 2014 – 2015 and 2015 – 2016 periods.
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During the year, 500 additional units were purchased, 500 units were sold, and Del ended the year with 200 units. Del is very satisfied with his first year of business although the cost of replacing his inventory rose continually throughout the year. The 500 units sold for a total of 320,000 and the 500 units purchased to replace them cost 256,000, so his cash account has increased by 64,000. Del is concerned however because he has three obligations yet to meet: taxes, dividends, and his wife. Federal and state income taxes will take 40% of his income. His investors are to receive dividends equal to half of any income after taxes are paid. And finally, Del promised his wife a big trip to Hawaii if she let him quit his job as a professor and start his own business. He promised her hed make at least 50,000 after taxes. That will give us 25,000 after paying off the investors. Del kept fairly good records during the year and knows the specific cost of each inventory unit sold. 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