How to execute a selected statement?

Use the following selected data from Business Solutions’ income statement for the three months ended March 31,?

• Use the following selected data from Business Solutions’ income statement for the three months ended March 31, 2012, and from its March 31, 2012, balance sheet to complete the requirements below: computer services revenue, $29,529; net sales (of goods), $19,656; total sales and revenue, $49,185; cost of goods sold, $14,990; net income, $19,683; quick assets, $91,100; current assets, $97,120; total assets, $119,760; current liabilities, $1,100; total liabilities, $1,100; and total equity, $118,660 1.Compute the gross margin ratio (both with and without services revenue) and net profit margin ratio. 2.Compute the current ratio and acid-test ratio. 3.Compute the debt ratio and equity ratio. 4.What percent of its assets are current? What percent are long term? Please do not just give the answers, but show your work as I need to know how to complete this for the test. THANK YOU!!!!!!

• Answer:

  Q1.Compute the gross margin ratio (both with and without services revenue) and net profit margin ratio. A. The company has two divisions, viz., Computer Division and Manufacturing Division. Data is incomplete in respect of Computer Division inasmuch as Cost of Sales in respect of this division has not been shown(There are large revenues from the division. Therefore, there must have been costs associated with this). Therefore, calculations are not possible without making some assumptions. I am giving the formulae, and you can make calculations with necessary assumption. i. Gross Margin=(Sales-Cost of Sales) Gross Margin Ratio=(Gross Margin/Sales)*100 ii. Net Margin Ratio=(Net Profit/Sales)*100 Q2.Compute the current ratio and acid-test ratio. A: i. Current Ratio=Current assets/current liabilities=97,120/1,100=88.29 (This is a very unusual ratio. Reasons need to be investigated. It may mean that it is a cash rich company and does not need credit; it may also mean it is not able to buy on credit. Current Ratio of1.33 is considered as an ideal ratio.) ii. Acid Test Ratio=quick assets/current liabilities=91,100/1,100=82.82 (This is a very unusual ratio. Reasons need to be investigated. It may mean that it is a cash rich company and does not need credit; it may also mean it is not able to buy on credit. Quick Ratio of1:1 is cidered as an ideal ratio.) Q3.Compute the debt ratio and equity ratio. A: Debt-equity ratio=Debt/Equity=Debt ie total liabilities in this case/Equity=1,100/118,660=0.0093 (Company has hardly any debt. So, the debt-equity ratio is abnormally low. Reasons need to be investigated. Normally, 2:3 debt-equity ratio is acceptable, though it may differ from industry to industry. Q4.What percent of its assets are current? What percent are long term? A: Total assets-Current assets=(119,760-97,120)=Long Term assets =22640 (It is presumed the company has no ficticious, intangible and non-current assets) Ratio of Current Assets to total assets=(97,120/119,760)*100=81.1 Ratio of Long Term Assets to total assets=(22640/119,760)*100=18.9 Q5. Please do not just give the answers, but show your work as I need to know how to complete this for the test. A. My advice will be to do as much home work as possible. Practice makes a person perfect.