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FIN254 Assignment# 1

Pulp, Paper and Paperboard Inc. reported $2.08 million in sales and $52,024 in net profits for 2019. The balance sheet shows total assets of $1 million, with current assets of $575,000 including $95,000 cash and $237,000 in accounts receivable. Total liabilities are $533,000 including $345,000 in current liabilities. Stockholders' equity is $467,000 with common stock of $255,000 and retained earnings of $212,000. Historical ratios for previous years and industry averages are also provided to analyze the company's financial performance and position.

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Zahidul Islam
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179 views

FIN254 Assignment# 1

Pulp, Paper and Paperboard Inc. reported $2.08 million in sales and $52,024 in net profits for 2019. The balance sheet shows total assets of $1 million, with current assets of $575,000 including $95,000 cash and $237,000 in accounts receivable. Total liabilities are $533,000 including $345,000 in current liabilities. Stockholders' equity is $467,000 with common stock of $255,000 and retained earnings of $212,000. Historical ratios for previous years and industry averages are also provided to analyze the company's financial performance and position.

Uploaded by

Zahidul Islam
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Assignment# 1 Sys

Submission Deadline: On or before 11.59 PM, Tuesday, August 18, 2020

Given the following balance sheet, income statement, historical ratios and industry averages,
calculate and interpret the Pulp, Paper, and Paperboard, Inc. financial ratios for the most recent
year. Analyze its overall financial situation from both a cross-sectional and time-series
viewpoint.
Income Statement
Pulp, Paper and Paperboard, Inc.
For the Year Ended December 31, 2019

Sales Revenue $2,080,976


Less: Cost of Goods Sold 1,701,000
Gross Profits $ 379,976
Less: Operating Expenses 273,846
Operating Profits $ 106,130
Less: Interest Expense 19,296
Net Profits Before Taxes $ 86,834
Less: Taxes (40%) 34,810
Net Profits After Taxes $ 52,024

Balance Sheet
Pulp, Paper and Paperboard, Inc.
December 31, 2019
Assets
Cash $ 95,000
Accounts receivable 237,000
Inventories 243,000
Total current assets $ 575,000
Gross fixed assets 500,000
Less: Accumulated depreciation 75,000
Net fixed assets $ 425,000
Total assets $1,000,000
Liabilities and stockholders' equity
Current liabilities
Accounts payable $ 89,000
Notes payable 169,000
Accruals 87,000
Total current liabilities $ 345,000
Long-term debts 188,000
Total liabilities $ 533,000
Stockholders' equity
Common stock 255,000
Retained earnings 212,000
Total stockholders' equity $ 467,000
Total liabilities and stockholders' equity $1,000,000
Pulp, Paper and Paperboard, Inc. had 25,500 common stocks outstanding in December 31, 2019
selling at $20 per share
Assignment# 1 Sys
Submission Deadline: On or before 11.59 PM, Tuesday, August 18, 2020

Historical and Industry Average Ratios


Pulp, Paper and Paperboard, Inc.
__________________________________________________________________
Industry
Ratio 2017 2018 2019 2019
__________________________________________________________________
Current Ratio 1.6 1.7 ----- 1.6
Quick Ratio 0.9 1.0 ----- 0.9
Inventory Turnover 8.1 9.3 ----- 8.4
Average Collection Period 33 days 37 days ----- 39 days
Total Asset Turnover 2.3 2.2 ----- 2.2
Debt Ratio 60% 56% ----- 58%
Times Interest Earned 2.5 3.5 ----- 2.3
Gross Profit Margin 21% 19.7% ----- 20.4%
Operating Profit Margin 4.7% 4.8% ----- 4.7%
Net Profit Margin 1.8% 1.6% ----- 1.4%
Return on total assets 4.1% 3.5% ----- 3.08%
Return on Equity 10.3% 7.9% ----- 7.3%
Price/Earning Ratio 15.2 12.5 ----- 16.3
Market/Book Ratio 1.80 1.35 ----- 1.60

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