Pronghorn Inc. manufactures a variety of consumer products. The company’s founders have run the company for 30 years and are now interested in retiring. Consequently, they are seeking a purchaser who will continue its operations, and a group of investors, Morgan Inc., is looking into the acquisition of Pronghorn. To evaluate its financial stability and operating efficiency, Pronghorn was requested to provide the latest financial statements and selected financial ratios. Summary information provided by Pronghorn is as follows. Pronghorn Inc. Income Statement For the Year Ended November 30, 2021 (in thousands) Sales (net) $ 30,510 Interest income 510 Total revenue 31,020 Costs and expenses Cost of goods sold 17,610 Selling and administrative expenses 3,560 Depreciation and amortization expense 1,900 Interest expense 910 Total costs and expenses 23,980 Income before taxes 7,040 Income taxes 2,816 Net income $ 4,224 Pronghorn Inc. Balance Sheet As of November 30 (in thousands) 2021 2020 Cash $ 410 $ 510 Short-term investments (at cost) 310 210 Accounts receivable (net) 3,210 2,910 Inventory 6,010 5,410 Total current assets 9,940 9,040 Property, plant, & equipment (net) 7,110 7,010 Total assets $ 17,050 $ 16,050 Accounts payable $ 3,710 $ 3,410 Income taxes payable 910 810 Accrued expenses 1,710 1,410 Total current liabilities 6,330 5,630 Long-term debt 2,010 1,810 Total liabilities 8,340 7,440 Common stock ($1 par value) 2,710 2,710 Paid-in capital in excess of par 1,010 1,010 Retained earnings 4,990 4,890 Total stockholders’ equity 8,710 8,610 Total liabilities and stockholders’ equity $ 17,050 $ 16,050 Selected Financial Ratios Pronghorn Inc. Current Industry Average 2020 2019 Current ratio 1.61 1.62 1.64 Acid-test ratio 0.64 0.6 0.74 Times interest earned 8.56 8.51 8.46 Profit margin on sales 13.21 % 12.11 % 13.01 % Asset turnover 1.85 1.84 1.85 Inventory turnover 3.18 3.22 3.19 (a) Calculate a new set of ratios for the fiscal year 2021 for Pronghorn based on the financial statements presented. (Round answers to 2 decimal places, e.g. 52.75 or 52.75%.) Current ratio : 1 Acid-test ratio : 1 Times interest earned Profit margin on sales % Asset turnover times Inventory turnover times

Pronghorn Inc. manufactures a variety of consumer products. The company’s founders have run the company for 30 years and are now interested in retiring. Consequently, they are seeking a purchaser who will continue its operations, and a group of investors, Morgan Inc., is looking into the acquisition of Pronghorn. To evaluate its financial stability and operating efficiency, Pronghorn was requested to provide the latest financial statements and selected financial ratios. Summary information provided by Pronghorn is as follows. Pronghorn Inc. Income Statement For the Year Ended November 30, 2021 (in thousands) Sales (net) $ 30,510 Interest income 510 Total revenue 31,020 Costs and expenses Cost of goods sold 17,610 Selling and administrative expenses 3,560 Depreciation and amortization expense 1,900 Interest expense 910 Total costs and expenses 23,980 Income before taxes 7,040 Income taxes 2,816 Net income $ 4,224 Pronghorn Inc. Balance Sheet As of November 30 (in thousands) 2021 2020 Cash $ 410 $ 510 Short-term investments (at cost) 310 210 Accounts receivable (net) 3,210 2,910 Inventory 6,010 5,410 Total current assets 9,940 9,040 Property, plant, & equipment (net) 7,110 7,010 Total assets $ 17,050 $ 16,050 Accounts payable $ 3,710 $ 3,410 Income taxes payable 910 810 Accrued expenses 1,710 1,410 Total current liabilities 6,330 5,630 Long-term debt 2,010 1,810 Total liabilities 8,340 7,440 Common stock ($1 par value) 2,710 2,710 Paid-in capital in excess of par 1,010 1,010 Retained earnings 4,990 4,890 Total stockholders’ equity 8,710 8,610 Total liabilities and stockholders’ equity $ 17,050 $ 16,050 Selected Financial Ratios Pronghorn Inc. Current Industry Average 2020 2019 Current ratio 1.61 1.62 1.64 Acid-test ratio 0.64 0.6 0.74 Times interest earned 8.56 8.51 8.46 Profit margin on sales 13.21 % 12.11 % 13.01 % Asset turnover 1.85 1.84 1.85 Inventory turnover 3.18 3.22 3.19 (a) Calculate a new set of ratios for the fiscal year 2021 for Pronghorn based on the financial statements presented. (Round answers to 2 decimal places, e.g. 52.75 or 52.75%.) Current ratio : 1 Acid-test ratio : 1 Times interest earned Profit margin on sales % Asset turnover times Inventory turnover times

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter15: Financial Statement Analysis

Section: Chapter Questions

Problem 60P

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Pronghorn Inc. Income Statement For the Year Ended November 30, 2021 (in thousands)
Sales (net)	$	30,510
Interest income		510
Total revenue		31,020
Costs and expenses
Cost of goods sold		17,610
Selling and administrative expenses		3,560
Depreciation and amortization expense		1,900
Interest expense		910
Total costs and expenses		23,980
Income before taxes		7,040
Income taxes		2,816
Net income	$	4,224

Pronghorn Inc. Balance Sheet As of November 30 (in thousands)
		2021		2020
Cash	$	410	$	510
Short-term investments (at cost)		310		210
Accounts receivable (net)		3,210		2,910
Inventory		6,010		5,410
Total current assets		9,940		9,040
Property, plant, & equipment (net)		7,110		7,010
Total assets	$	17,050	$	16,050
Accounts payable	$	3,710	$	3,410
Income taxes payable		910		810
Accrued expenses		1,710		1,410
Total current liabilities		6,330		5,630
Long-term debt		2,010		1,810
Total liabilities		8,340		7,440
Common stock ($1 par value)		2,710		2,710
Paid-in capital in excess of par		1,010		1,010
Retained earnings		4,990		4,890
Total stockholders’ equity		8,710		8,610
Total liabilities and stockholders’ equity	$	17,050	$	16,050

Selected Financial Ratios
	Pronghorn Inc.		Current Industry Average
	2020			2019
Current ratio	1.61			1.62		1.64
Acid-test ratio	0.64			0.6		0.74
Times interest earned	8.56			8.51		8.46
Profit margin on sales	13.21	%		12.11	%	13.01	%
Asset turnover	1.85			1.84		1.85
Inventory turnover	3.18			3.22		3.19

(a)

Calculate a new set of ratios for the fiscal year 2021 for Pronghorn based on the financial statements presented. (Round answers to 2 decimal places, e.g. 52.75 or 52.75%.)

Current ratio			: 1
Acid-test ratio			: 1
Times interest earned
Profit margin on sales			%
Asset turnover			times
Inventory turnover			times

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