Happy Hamburger Company : Calculate the following ratios for the company. Explain whether the company is doing better or worse than the industry average for each ratio.

Critical Thinking

 

Happy Hamburger Company 

Below are the balance sheet and income statement for Happy Hamburger Company.

 

Happy Hamburger Company
Balance Sheet as of December 31, 20XX
Assets     Liabilities and Shareholder Equity  
Cash            78,000   Accounts payable          136,000
Accounts Receivable          336,500   Current portion of debt            82,500
Inventories          225,000   Other current liabilities          114,000
Total current assets          639,500   Total current liabilities          332,500
Net fixed assets          310,000   Long-term debt          252,000
Total assets          949,500   Total Liabilities          584,500
      Common equity          365,000
      Total Liabilities & Equity          949,500

 

 

Happy Hamburger Company
Income Statement for the year ending December 31, 20XX
Sales           1,704,560
Cost of goods sold           1,489,000
Selling, general and administrative expenses              152,000
   Earnings before interest and taxes (EBIT)                63,560
Interest expense                26,200
   Earnings before taxes (EBT)                37,360
Federal and state income taxes (40%)                14,944
Net Income                22,416

Required:

  1. Calculate the following ratios for the company.
  2. Explain whether the company is doing better or worse than the industry average for each ratio.
  Happy

Hamburger

Industry

Average

Current ratio   1.7
Days sales outstanding (based on 365 day year)   36 days
Inventory turnover   7.3
Fixed asset turnover   12.1
Total asset turnover   3.00
Return on sales   3.20%
Return on assets   3.60%
Return on equity   9.00%
Debt ratio   71%

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Use an Excel spreadsheet for your answers.

You need to do deep and clear analysis.

Show your work by writing the formulas.

Follow the instructions carefully.

It needs to be original work.

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