Gitman: Principl Manageri Finance_15 (15th Edition) (What's New in Finance)
15th Edition
ISBN: 9780134476315
Author: Chad J. Zutter, Scott B. Smart
Publisher: PEARSON
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Textbook Question
Chapter 3, Problem 3.24P
Learning Goal 6
P3-24 Financial statement analysis The financial statements of Zach Industries for the year ended December 31, 2019, follow.
Zach Industries Income Statement for the Year Ended December 31 2019
| Sales revenue | $160,000 |
| Less: Cost of goods sold | 106,000 |
| Gross profits | $ 54,000 |
| Less: Operating expenses | |
| Selling expense | $ 16,000 |
| General and administrative expenses | 10,000 |
| Lease expense | 1,000 |
| Depreciation expense | 10,000 |
| Total operating expense | $37,000 |
| Operating profits | $ 17,000 |
| Less: Interest expense | 6,100 |
| Net profits before taxes | $10,900 |
| Less: Taxes | 4,360 |
| Net profits after taxes | $ 6,540 |
Zach Industries Balance Sheet December 31, 2019
| Assets | |
| Cash | $ 500 |
| Marketable securities | 1,000 |
| Accounts receivable | 25,000 |
| Inventories | 45,500 |
| Total current assets | $72,000 |
| Land | $ 26,000 |
| Buildings and equipment | 90,000 |
| Less: Accumulated depreciation | 38,000 |
| Net fixed assets | $78,000 |
| Total assets | $150,000 |
| Liabilities and Stockholders’ Equity | |
| Accounts payable | $ 22,000 |
| Notes payable | 47,000 |
| Total current liabilities | $ 69,000 |
| Long-term debt | 22,950 |
| Common stock | 31,500 |
| 26,550 | |
| Total liabilities and stockholders’ equity | $150,000 |
| The firm’s 3,000 outstanding shares of common stock closed 2019 at a price of $25 per share. | |
- a. Use the preceding financial statements to complete the following table. Assume that the industry averages given in the table are applicable for both 2018 and 2019.
- b. Analyze Zach Industries’ financial condition as it is related to (1) liquidity, (2) activity, (3) debt, (4) profitability, and (5) market. Summarize the company's overall financial condition.
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12,000
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Income from operations
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21,700
Income before income taxes
307,200
242,700
Income tax expense
93,700
74,700
Net income
$213,500
$168,000
Cullumber CompanyBalance SheetsDecember 31
Assets
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103,900
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Chapter 3 Solutions
Gitman: Principl Manageri Finance_15 (15th Edition) (What's New in Finance)
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