Financial Statements and Ratios-Bike-With-Us Corporation, a specialty bicycle parts replacement venture, was started last year by two former professional bicycle riders who had substantial competitive racing experience, including the Tour de France. The two entrepreneurs borrowed $50,000 from members of their families, and each put up $30,000 in equity capital. Retail space was rented, and $60,000 was spent for fixtures and store equipment. Following is the abbreviated income statement and balance sheet information for the Bike-With-Us Corporation after one year of operation. BIKE-WITH-US CORPORATION INCOME STATEMENT
Sales $325,000
Operating costs 285,000
Depreciation 10,000
Interest 5,000
Taxes 6,000
Cash $1,000
Receivables 30,000
Inventories 50,000
Fixed assets, net 50,000
Payables 11,000
Accruals 10,000
Long-term loan 50,000
Stockholders’ equity 60,000
A. Prepare an income statement and a balance sheet for the Bike-With-Us Corporation using only the information provided above.
B. Calculate the current ratio, quick ratio, and NWC-to-total-assets ratio.
C. Calculate the total-debt-to-total-assets ratio, debt-to-equity ratio, and interest coverage.
D. Calculate the net profit margin, sales-to-total-assets ratio, and the return on assets.
E. Calculate the equity multiplier. Combine this calculation with the calculations in Part D to show the ROE model with its three components.