Response to the following problem:
Below are the balance sheet and income statement for Happy Hamburger Company.
| Happy Hamburger Company |
| Balance Sheet as of December 31, 20XX |
|
Assets
|
|
|
Liabilities and Shareholder Equity
|
|
|
Cash
|
78,000
|
|
Accounts payable
|
136,000
|
|
Accounts Receivable
|
336,500
|
|
Current portion of debt
|
82,500
|
|
Inventories
|
225,000
|
|
Other current liabilities
|
114,000
|
|
Total current assets
|
639,500
|
|
Total current liabilities
|
332,500
|
|
Net fixed assets
|
310,000
|
|
Long-term debt
|
252,000
|
|
Total assets
|
949,500
|
|
Total Liabilities
|
584,500
|
|
|
|
Common equity
|
365,000
|
|
|
|
Total Liabilities & Equity
|
949,500
|
| Happy Hamburger Company |
| Income Statement for the year ending December 31, 20XX |
| Sales |
1,704,560 |
| Cost of goods sold |
1,489,000 |
| Selling, general and administrative expenses |
152,000 |
| Earnings before interest and taxes (EBIT) |
63,560 |
| Interest expense |
26,200 |
| Earnings before taxes (EBT) |
37,360 |
| Federal and state income taxes (40%) |
14,944 |
| Net Income |
22,416 |
Required:
Calculate the following ratios for the company.
Explain whether the company is doing better or worse than the industry average for each ratio.
|
Happy
Hamburger
|
Industry
Average
|
| Current ratio |
|
1.7 |
| Days sales outstanding (based on 365 day year) |
|
36 days |
| Inventory turnover |
|
7.3 |
| Fixed asset turnover |
|
12.1 |
| Total asset turnover |
|
3.00 |
| Return on sales |
|
3.20% |
| Return on assets |
|
3.60% |
| Return on equity |
|
9.00% |
| Debt ratio |
|
71% |
Use an Excel spreadsheet for your answers.