Bedrosian Incorporated has a line of credit from the Belmont National Bank that is due to be renewed on February 1.The bank has requested the company's current Income Statement and Comparative Statements of Financial Position which appear below. Bedrosian Incorporated
Income Statement
Year Ended December 31, This Year
(in thousands)

\begin{array}{lr}\text {Revenue }\\\text {Sales }&\$ 60,000 \\\text {Other. }&4,500 \\\text {Total revenue }& 64,500 \\\text { Expenses }\\\text {Cost of goods sold }&40,500 \\\text {Selling and administrative. }&11,625 \\\text {Depreciation and amortization }&1,875 \\\text {Interest }&1,500 \\\text {Total expenses }& 55,500 \\\text { Income before income taxes}&9,000 \\\text {Income taxes. }&3,600 \\\text {Net income }& 5,400 \\\text {Less: Dividends to common stockholders ( \( \$ 3.86 \) per share) }&2,550 \\\text {Net income added to retained earnings }&2,850 \\\text {Retained earnings, beginning of year }&8,550 \\\text {Retained earnings, end of year. }&\$11,400 \\\text { Earnings per share }&\$8.18\end{array}

Bedrosian Incorporated
Statement of Financial Position
As of December 31
(in thousands)

\begin{array}{l}&\text { This Year}&\text { Last Year }\\\text { Assets }\\\text { Current assets: }\\\text {Cash and marketable securities }&\$ 1,950 & \$ 1,575 \\\text {Accounts receivable, net. }&3,600 & 3,750 \\\text { Inventories}&4,875 & 4,650 \\\text {Prepaid items }&375 & 225 \\\text {Total current assets }&10,800 & \underline{10,200} \\\text { Noncurrent assets: }\\\text {Investments, at cost }&7,950 & 7,950 \\\text {Deposits. }&750 & 600 \\\text {Property, plant, and equipment }&21,000 & 19,500 \\\text {Total assets }& \$ 40,500 & \$ 38,250 \\\\\text { Liabilities and Shareholders' Equity }\\\text {Short-term loans }&\$ 1,650 & \$ 1,800 \\\text {Accounts payable }&5,400 & 5,325 \\\text {Salaries and wages payable }&1,950 & 2,025 \\\text {Total current liabilities }& 9,000 & 9,150 \\\text {Long-term debt }&12,000 & \underline{12,825} \\\text {Total liabilities }&\underline{21,000} & \underline{21,975} \\\text { Shareholders' equity }\\\text {Common stock, at par }&3,300 & 3,150 \\\text {Paid-in capital in excess of par. }&4,800 & 4,575 \\\text {Total paid-in capital. }& 8,100 & 7,725 \\\text {Retained earnings }&11,400 & \underline{8,550} \\\text {Total stockholders' equity }& \underline{19,500} & \underline{16,275} \\\text {Total liabilities and stockholders' equity }& \underline{\$ 40,500} & \underline{\mathbf{\$ 3 8 , 2 5 0}} \\\end{array}

The bank has also requested that Bedrosian calculate a number of financial ratios.Bedrosian's financial ratios have not yet been calculated for this year,but the company's accounting staff has gathered the following industry averages for the ratios from various sources.

\begin{array}{lr}&\text { Industry } \\&\text { Averages } \\\text {Return on total assets }&6.4 \% \\\text {Return on common stockholders' equity }&12.5 \% \\\text {Current ratio. }&1.86 \\\text {Acid-test ratio }&0.85 \\\text { Debt-to-equity ratio}&1.23 \\\text {Times interest earned ratio }&7.78 \\\text {Dividend payout ratio. }&39.6 \%\end{array}

Required:
a.Calculate the following financial ratios for this year for Bedrosian Incorporated.
1.Return on total assets.
2.Return on common stockholders' equity.
3.Current ratio.
4.Acid-test ratio.
5.Debt-to-equity ratio.
6.Times interest earned.
7.Dividend payout ratio.
b.By comparing the ratios calculated in Requirement A with the industry ratios,evaluate Bedrosian's operations.

Excerpts from Goodrow Corporation's Most Recent Balance Sheet and Income

Multiple Choice

Correct Answer:VerifiedUnlock this answer nowGet Access to more Verified Answers free of chargeAccess For Free

Correct Answer:
Verified
Unlock this answer now
Get Access to more Verified Answers free of charge