Engineering Economic Analysis

(Chris Devlin) #1
552 ACCOUNTING AND ENGINEERINGECONOMY

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EEE Balance Sheet Data (thousands)
Cash $110,000
Securities 40,000
Accounts receivable 160,000
Retailers' inventories 250,000
Prepaid expenses 3,000
Accounts payable 351,000
Accumulated liabilities 89,000

18-16 For Magdalen Industries, compute the net income be-
fore taxes and net profit (or loss). Taxes for the year
were $1 million. Calculate the interest coverage and
net profit ratio. Is the interest coverage acceptable?
Explain why or why not.

Magdalen Industries Balance Sheet
Data (millions)
Revenues
Total operating revenue
(including sales of $48 million)
Total nonoperating revenue
Expenses.
Total operating expenses
Total nonoperating expenses
(interest payments)

$51

35

70
7

18-17 Find the net income ofThrbo Start given the following
data.

Turbo Start Balance Sheet
Data (thousands)

Accounts payable
Selling expense
Sales revenue
Owner's equity
Income taxes
Cost of goods sold
Accounts receivable

$ 1,000
5,000
50,000
4,500
2,000
30,000
15,000

(Answer: $13,000,000)

18-18 Thrbo Start (Problem 18-17) has current assets total-
ing $1.5 million (this includes $500,000 in current in-
ventory) and current liabilities totaling $50,000. Find
the current ratio and acid-test ratio. Are the ratios at
desirable levels? Explain.


18-19 For J & W Graphics Supply, compute the current ratio.
Is this a financially healthy company? Explain.

J&W Graphics Supply Balance
Sheet Data (thousands)
Assets
Cash
Inventories
Accountsreceivable
Bad debt provision
Liabilities
Notes payable
Accrued expenses
Accounts payable

$1740
900
2500
-75

500
125
1050

18-20 For Sutton Manufacturing, determine the current ratio
and the acid-test ratio. Are these values acceptable?
Why or why not?

Sutton Manufacturing Balance Sheet Data
(thousands)
Assets Liabilities
Current assets Current liabilities
Cash $870 Notes payable $500

Accounts (^450) Accountspayable 600
receivable
Inventory^1200 Accruals^200
Prepaid expenses^50 Taxespayable^30
Other expenses^10 Current portion^100



  • long-termdebt -
    Total current assets 2670 Total current 1430
    liabilities
    Long-term debt^2000
    Officerdebt 200
    Net fixed assets (subordinated) -
    Land 1200 Total liabilities 3630
    Plant and 2800
    equipment
    Common stock^1670


Notes receivable (^200) Capital surplus^400
Intangibles^20 Retained earnings 1200
Other assets - 100 Total net worth^3270 -
Total assets 6900 Totalliabilities 6900
and net Worth
J
.

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