ption 1: Ratio Analysis Exercises and Problems
Use the net income statement for Summer Peebles, Inc., below, to do the following assigned problems.
- Compute the following earnings coverage ratios:
- Earnings to fixed charges.
- Cash flow to fixed charges.
- Earnings coverage of preferred dividends.
- Analyze and interpret the earnings coverage ratios in (A).
Summer Peebles, Inc. Consolidated Income Statement ($ thousands)
Year Ending December 31, 2015
Sales
$15,000.00
Undistributed Income of Less Than 50%-Owned Affiliates
$300.00
Total Revenue
$15,300.00
Cost of Goods Sold
$7,000.00
Selling and Administrative Expenses
$2,000.00
Depreciation
$600.00
Rental Expense
$500.00
Share of Minority Interest in Consolidated Income
$200.00
Interest Expense
$400.00
-$10,700.00
Income Before Taxes
$4,600.00
Income Taxes
Current
$900.00
Deferred
$400.00
-$1,300.00
Net Income
$3,300.00
Less Dividends
Common Stock
$300.00
Preferred Stock
$400.00
-$700.00
Earnings Retained for the Year
$2,600.00
Additional Information:
- The following changes occurred in current assets and current liabilities for 2015:
- Current Accounts Increase (Decrease)
- Accounts Receivable $900.00
- Notes Payable to Bank -$200.00
- Inventories -$800.00
- Accounts Payable $700.00
- Dividend Payable -$100.00
- The effective tax rate is 40%.
- Shares of minority interests in consolidated income do not have fixed charges.
- Interest expenses include:
Interest Incurred (Except Items Below)
$600.00
Amortization of Bond Premium
-$300.00
Interest on Capitalized Leases
$140.00
Interest Incurred
$440.00
Less Interest Capitalized
-$40.00
Interest Expense
$400.00
- Amortization of previously capitalized interest (included in depreciation) is $60.
- Interest implicit in operating lease rental payment (included in rental expense) is $120.
Your submission should:
- Be 1-2 pages for the written portion.
- Include the Excel spreadsheet with computations.
- Clearly separate your responses so your instructor knows the problems you are answering.
THE ANSWERS ARE INCLUDED IN THIS POST. 1, 2, 3, 4
PAPER MUST BE FORMED AND WRITTEN WITH THE EXCEL SHEET