Question

I. The following information for Ford Company for the year 2019 has been assembled: (5 marks)
Market value at December 31, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $600,000
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $100,000
Debt ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40%
Return on sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10%
Asset turnover . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.0
You are required to compute the following information:
a. Total assets b. Sales
c. Net income d. Price-earnings ratio

Answer 1

Answer:

Explanation:

Step 1

Given information :

Market value at December 31, 2019 :  $600,000

Total liabilities : $100,000

Debt ratio : 40%

Return on sales : 10%

Asset turnover : 2.0

Step 2

1. Total assets

In a balance sheet , total liabilities and total assets are equal. The total liabilities are given in the question . Hence, total assets are $100,000

Step 3

2. Sales

Assets turnover ratio=Sales Total assets2=Sales$100,000Sales=$100,000×2Sales=$200,000