Debt, Current Ratio and Retained Earnings After Paying Dividends Calcualtion

Question

PSU Manufacturing Inc. has the following financial statements data for 2012.

Income Statement
Sales                      $102,500
Cost of Goods           $50,000
SG & E Expenses       $35,000
EBIT                         $17,000
Interest Expenses        $2,500
Taxes                         $6,000
Net Income                 $9,000

Balance Sheet
Cash                              $40,000
Fixes Assets                   $55,000
Total Assets                   $95,000
Accounts Payable           $12,000
Long-term Debt              $25,000
Retained Earnings           $28,000
Paid-in Common Equity   $30,000

Use the financial information and

a. Compute the firm’s debt ratio and current ratio
b. Is the firm profitable? Does the balance sheet balance? Explain.
c. If the firm paid $5,000 in dividends in 2012, what was its retained earning balance at the end of the 2009?

Summary

The question belongs to Finance and it is about calculating a firm’s debt ratio and current ratio, checking whether or not the firm is profitable and the balance sheet balances or not and to calculate the retained earnings of the firm, if it paid dividends in the year. These questions have been calculated in the solution.

Total Word Count 95