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RATIO ANALYSIS

1. Impact of a net income on a firm’s balance sheet Conrad Air, Inc., reported net income of $1,365,000
for the year ended December 31,2013. Show how corporation balance sheet would change from 2012
to 2013 depending on how Conrad allocate those earnings as described in the scenarios that appear
below.

Conrad Air, Inc. Balance Sheet as of December 31, 2012


Assets Liabilities and Stockholders’ Equity
Cash $120,000 Accounts payable $70,000
Marketable securities 35,000 Short-term notes 55,000
Accounts receivable 45,000 Current liabilities 125,000
Inventories 130,000 Long-term debt 2,700,000
Current assets 330,000 Total liabilities 2,825,000
Equipment 2,970,000 Common stock 500,000
Buildings 1,600,000 Retained earnings 1,575,000
Fixed assets 4,570,000 Stockholders’ equity 2,075,000
Total assets 4,900,000 Total liabilities and 4,900,000
equity

a. Conrad paid no dividends during the year and invested the funds in the marketable securities
b. Conrad paid dividends totaling $500,000 and used the balance of the net income to retire (pay-
off) long-term debt
c. Conrad paid dividends totaling $500,000 and invested the balance of the net income in building
a new hangar
d. Conrad paid out all $1,365,000 as dividends to its stockholders.

2. Complete the balance sheet and sales information as follows:

Balance Sheet
Cash Account Payable
Accounts Receivable Long term Debt $60.000
Inventories Common Stock
Fixed Asset Retained Earning 97.500
Total asset $300.000 Total Liabilities and
Equities
Sales Cost of Good Sold

Additional Information:
Debt Ratio 50%
Current Ratio 1,8x
Total Asset Turnover 1,5x
Average Collection Period 36,5 hari
Gross Profit Margin 25%
Inventory Turnover 5x
*1 year = 365 days