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) Use the following current year financial statements for Abbee Aviation to perform ratio analysis.
Abbee Aviation Income Statement
Revenue $4,400,000
Cost of goods sold 2,300,000
Gross profit 2,100,000
Operating expenses 750,000
Operating income (EBIT) 1,350,000
Interest expense 270,000
Earnings before taxes 1,080,000
Taxes (at 40%) 432,000
Net income 648,000
Abbee Aviation Balance Sheet
Current assets
Cash $2,780,000
Accounts receivable 670,000
Inventory 750,000
Total current assets 4,200,000
Non-current assets
Fixed assets 5,200,000
Accumulated depreciation (2,400,000)
Net fixed assets 2,800,000
Total assets $7,000,000
Current liabilities
Accounts payable 890,000
Accrued liabilities 560,000
Total current liabilities 1,450,000
Non-current liabilities
Bonds payable 3,000,000
Total liabilities 4,450,000
Shareholders’ equity
Common stock 550,000
Retained earnings 2,000,000
Total shareholders’ equity 2,550,000
Total liabilities and shareholders’ equity $7,000,000
(a) Calculate the firm’s operating return on assets. Assume that the firm’s year-end total assets balance for the prior year was $6 million.
(b) Calculate the firm’s net working capital
(c) What is the number of “accounts receivable days” for Abbee Aviation? Assume that the firm’s year-end accounts receivable balance for the prior year was $650,000.
(d) What is the firm’s return on assets at the end of this year? Assume that the firm’s year-end total assets balance for the prior year was $6 million. (Points : 40)
