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FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Question
Instructions:
I. Resolve the ratios listed on table a for each year (2020 & 2021):
a. For each ratio includes the formula with math computes (2020 & 2021)
b. . Fill M&G Industries Ratio Analysis Table A. (2020 & 2021)
II. Perform the following Analysis:
a. Explain each ratio results for 2021 only.
b. Compare each ratio performance with the previous year results (compare 2021 results with 2020 results)
c. Compare each Ratio results for 2021 with their respective Industry average.

Transcribed Image Text:Based on the preceeding statements, complete the following table:
M & G Industries Ratio Analysis
Industry
Averagis
Acaua!
Actual
2020
2021
Current ratio
Acid-test ratio
Average collection period
Inventory turnover
Debt ratio
Times interest earmed
Total asset turnover
Fixed asset turnover
Return on equity
1.80
.70
37.00
2.50
58%
3.80
1.14
1.40
9.5%

Transcribed Image Text:Analysis of Financial Statements (Financial Ratios)
M & G Industries Balance Sheet
For December 31, 2020 and 2021
2020
2021
Cash
Accounts receivable
Inventories
Total current asseis
Land
$ 9,000
12,500
29,000
$ 50,500
20,000
500
16,000
45,500
$ 62,000
26,000
100,000
Buildings and equipment
Less: allowance for depreciation
Total fixed assets
Total assets
70,000
(28,000)
$ 62,000
$112,500
$ 10,500
17,000
$ 27,500
28,750
31,500
24,750
$112,500
(38,000)
$ 88,000
$150,000
$ 22,000
47,000
$ 69,000
22,950
31,500
26,550
$150,000
Accounts Payable
Short-term bank notes
Total current liabilities
Long-term debt
Common stock
Retained earnings
Total debt and equity
M&G Industries Income Statement
For the Years Ended December 31, 2020 and 2021
2020
2021
Sales (all credit)
Cost of goods sold
Gross profit
Operating expenses
Fixed cash operating expenses
Variable operating expenses
Depreciation
Total operating expenses
Earnings before interest and taxes
Interest expense
Earnings before taxes
Талеs
$125,000
75,000
50,000
$160,000
96,000
$ 64,000
$ 21,000
12,500
$ 21,000
16,000
4,500
$ 38,000
$ 12,000
3,000
$ 9,000
4,500
$ 4,500
10,000
$ 47,000
$ 17,000
6,100
$ 10,900
5,450
$ 5,450
Net income
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