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Cookie Creations 18 The balance sheet and income statement of Cookie & Coffee Creations Inc. for its first year of operations, the year ended October 31, 2018, follows.

COOKIE & COFFEE CREATIONS INC.
Balance Sheet
October 31, 2018
Assets
Current Assets
?????Cash $32,219
?????Accounts receivable 3,250
?????Inventory
17,897
?????Prepaid Rent 6,300 $59,666
Property, Plant, and Equipment
?????Equipment
$99,700
?????Accumulated depreciation?equipment
(9,850 ) 89,850
???????Total assets
$149,516
Liabilities and Stockholders' Equity
Current Liabilities
?????Accounts payable
$5,848
?????Income tax payable
18,500
?????Dividends payable
700
?????Salaries and wages payable
2,250
?????Interest payable
188
?????Note payable?current portion
4,000 $31,486
Long-term Liabilities
?????Note payable?long-term portion
6,000
Total liabilities
37,486
Stockholders' Equity
?????Paid-in capital
???????Preferred stock, 2,800 shares issued and?outstanding
$14,000
???????Common stock, 25,930 shares issued, 25,180 outstanding
25,930 39,930
Retained earnings
72,600
?????Total paid-in capital and retained earnings
112,530
?????Less: Treasury stock?common (750 shares), at cost
(500 )
???????Total stockholders? equity
112,030
???????Total liabilities and stockholders' equity $149,516

COOKIE & COFFEE CREATIONS INC.
Income Statement
Year Ended October 31, 2018
Sales revenue $462,500
Cost of goods sold 231,250
Gross profit 231,250
Operating expenses
?????Salaries and wages expense $92,500
?????Depreciation expense 9,850
?????Other operating expenses 35,987 138,337
Income from operations 92,913
Other expenses
?????Interest expense 413
Income before income tax 92,500
Income tax expense 18,500
Net income $74,000

Additional information:

Natalie and Curtis are thinking about borrowing an additional $20,000 to buy more equipment. The loan would be repaid over a 4-year period. The terms of the loan provide for equal semiannual installment payments of $2,500 on May 1 and November 1 of each year, plus interest of 5% on the outstanding balance. Dividends on preferred stock were $1,250. Since this is the first year of operations and the beginning balances are zero, use the ending balance as the average balance where appropriate.
Calculate the following ratios.?(Round all answers to 1 decimal place, e.g. 2.2 or 2.2%.)

1. Current ratio :1
2. Accounts receivable turnover
times
3. Inventory turnover times
4. Debt to assets
%
5. Times interest earned times
6. Gross profit rate %
7. Profit margin %
8. Asset turnover times
9. Return on assets %
10. Return on common stockholders' equity %

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Based on your analysis in above part, do you think a bank would lend Cookie & Coffee Creations Inc. $20,000 to buy the additional equipment?



?NoYes


 


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