Question

Module 14: Critical Thinking

Happy Hamburger Company (130 Points)

Below are the balance sheet and income statement for HappyHamburger 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 Currentportion of debt 82,500
Inventories 225,000 Other current liabilities 114,000
Total current assets 639,500 Totalcurrent 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 theindustry average for each ratio.
Happy
Hamburger Industry
Average
Current ratio 1.7
Days sales outstanding (based on 365 day year) 36days
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%


(Include the formulas )