1.

The following data were taken from the financial statement of Springfield Car and Truck
Company, a retail motor vehicle dealer, for the calendar year 2012. The given below are the
industry average for motor vehicle dealers.
a. Fill in the ratios for Springfield and Truck. (7)
b. Indicate by comparison with the industry, the possible errors in management policies
reflected in these financial statements. (8)

Springfield Car and Truck Company

Balance sheet
Dec 31 2012
Cash 5030 Account payable 105015
Receivable 88740 Notes payable (10%) 4025
Inventory 105700 Other current liabilities 33290
Total current assets 199470 Total current liabilities 142330

Net fixed assets 35,000 Long term debt (10%) 30370

Net worth 61770
Total assets 234470 Total Liabilities & equity
234470

Springfield Car and Truck Company

Income Statement
For year ended December 31, 2012

Sales 497000
Cost of goods sold 424680
72320
Operating expenses 51412
Depreciation 4820
Interest expenses 7440
Total expenses 63674
Net Income before tax 8648
Tax (50%) 4324
Net Income 4324
 Springfield ratio Industry

a. Current ratio ? 1.43 times

b. Debt ratio ? 66%
c. Times Interest earned ? 3.53 x
d. Inventory turnover ratio ? 6.6 times
e. Average collection period ? 64 days
f. Sales/Total assets ? 2.95 x
g. Net profit/Sales ? 1.02%
h. ROA ? 3.01%
i. ROE ? 9.09%