FIN 200: Assignment Workbook Week 2 Solution

FIN 200

Axia College of University of Phoenix (UoP)

Introduction to Finance: Harvesting the Money Tree

Finance 200 Assignment Workbook Week 2 Solution

Week 2 CheckPoint: Financial Ratios

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Using the financial statements for The Niara Corporation, calculate the 13 basic ratios found in the chapter.
You must show your work to get credit.

Niara Corporation
Income Statement
For the Year Ended December 31, 2009
Sales $ 2,200,000
Cost of goods sold 1,300,000
Gross profits 900,000
Selling and administrative expense 420,000
Depreciation expense 150,000
Operating income 330,000
Interest expense 90,000
Earnings before taxes 240,000
Taxes 80,000
Earnings after taxes 160,000
Preferred stock dividends 10,000
Earnings available to common stockholders $ 150,000
Shares outstanding 120,000
Earnings per share $1.25

Statement of Retained Earnings
For the Year Ended December 31, 2009
Retained earnings, balance, January 1, 2009 $ 500,000
Add: Earnings available to common stockholders, 2009 150,000
Deduct: Cash dividends declared and paid in 2009 30,000
Retained earnings, balance, December 31, 2009 $ 620,000

Niara Corporation
Balance Sheet
December 31, 2009
Year‐End
Assets 2009
Current assets:
Cash $ 135,000
Accounts receivable (net) 340,000
Inventory 405,000
Prepaid expenses 25,000
Total current assets 905,000
Investments (long‐term securities) 50,000
Plant and equipment 2,450,000
Less: Accumulated depreciation 1,150,000
Net plant and equipment 1,300,000
Total assets $ 2,255,000
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 475,000
Notes payable 400,000
Accrued expenses 60,000
Total current liabilities 935,000
Long‐term liabilities:
Bonds payable, 2009 80,000
Total liabilities 1,015,000
Stockholders’ equity:
Preferred stock, $100 par value 90,000
Common stock, $1 par value 120,000
Capital paid in excess of par 410,000
Retained earnings 620,000
Total stockholders’ equity 1,240,000
Total liabilities and stockholders’ equity $ 2,255,000

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