Orca Industries Below are the two most recent balance sheets and most recent income statement for Orca Industries. The company has an effective tax rate of 35%. Assume all sales are made on credit. Balance Sheet 2011 2010 Assets: Cash $10,000 $6,000 Accounts Receivable (net) 6,000 1,500 Inventory 8,000 10,000 Long-lived assets 12,000 11,000 Less:Accumulated depreciation (4,000) (2,000) Total assets $32,000 $26,500 Liabilities and Stockholders’ Equity: Accounts payable $5,000 $6,000 Deferred revenues 1,000 2,000 Long-term note payable 10,000 10,000 Less: Discount on note payable (800) (1,000) Common stock 12,000 6,000 Retained earnings 4,800 3,500 Total liabilities and stockholders’ equity $32,000 $26,500 Income Statement For the year ended December 31, 2011 Revenues $42,000 Cost of goods sold (24,000) Depreciation expense (2,000) Interest expense (3,000) Bad debt expense (2,000) Other expense (including income taxes) (9,000) Net income $2,000 Using the information for Orca Industries calculate the following: ROA: ROCE: Profit margin for ROCE: Asset Turnover: Accounts Receivable Turnover: EPS (assume 1,000 shares outstanding) Accounts Payable Turnover: Inventory Turnover: Price Earnings Ratio (P/E) assuming Orca's stock price is $24.00:
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
Orca Industries
Below are the two most recent balance sheets and most recent income statement for Orca Industries. The company has an effective tax rate of 35%. Assume all sales are made on credit.
|
Balance Sheet |
|
|
|
|
2011 |
2010 |
|
Assets: |
|
|
|
Cash |
$10,000 |
$6,000 |
|
Accounts Receivable (net) |
6,000 |
1,500 |
|
Inventory |
8,000 |
10,000 |
|
Long-lived assets |
12,000 |
11,000 |
|
Less:Accumulated |
(4,000) |
(2,000) |
|
Total assets |
$32,000 |
$26,500 |
|
|
|
|
|
Liabilities and |
|
|
|
Accounts payable |
$5,000 |
$6,000 |
|
Deferred revenues |
1,000 |
2,000 |
|
Long-term note payable |
10,000 |
10,000 |
|
Less: Discount on note payable |
(800) |
(1,000) |
|
Common stock |
12,000 |
6,000 |
|
|
4,800 |
3,500 |
|
Total liabilities and stockholders’ equity |
$32,000 |
$26,500 |
Income Statement
For the year ended December 31, 2011
|
Revenues |
$42,000 |
|
Cost of goods sold |
(24,000) |
|
Depreciation expense |
(2,000) |
|
Interest expense |
(3,000) |
|
|
(2,000) |
|
Other expense (including income taxes) |
(9,000) |
|
Net income |
$2,000 |
Using the information for Orca Industries calculate the following:
ROA:
ROCE:
Profit margin for ROCE:
Asset Turnover:
Accounts Receivable Turnover:
EPS (assume 1,000 shares outstanding)
Accounts Payable Turnover:
Inventory Turnover:
Price Earnings Ratio (P/E) assuming Orca's stock price is $24.00:
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