Bike-With-Us Corporation, a specially bicycle parts replacement venture, was started last year by two former professional bicycle riders who had substantial competitive racing experience, including the Tour de France. The two entrepreneurs borrowed $50,000 from members of their families, and each put up $30,000 in equity capital. Retail space was rented, and $60,000 was spent for fixtures and store equipment. Following is the abbreviated income statement and balance sheet information for the Bike-With-Us Corporation after one year of operation.BIKE-WITH-US CORPORATION INCOME STATEMENTSales ............................. $325,000Operating costs .................. 285,000Depreciation ....................... 10,000Interest ............................... 5,000Taxes ................................. 6,000Cash ................................. $1,000Receivables ......................... 30,000Inventories .......................... 50,000Fixed assets, net .................... 50,000Payables ............................. 11,000Accruals ............................ 10,000Long-term loan ..................... 50,000Stockholders' equity ............... 60,000
A. Prepare an income statement and a balance sheet for the Bike-With-Us Corporation using only the information provided above.B. Calculate the current ratio, quick ratio, and NWC-to-total-assets ratio.C. Calculate the total-debt-to-total-assets ratio, debt-to-equity ratio, and interest coverage.D. Calculate the net profit margin, sales-to-total-assets ratio, and the return on assets.E. Calculate the equity multiplier. Combine this calculation with the calculations in Part D to show the ROE model with its three components.