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Homework Problem - Chapter Five. This is a comprehensive problem that provides a review of the material covered in the course to date, Southface Sportswear Corporation Balance Sheet - December 31, 2012 Assets Liabilities and Stockholder's Equity Cash $ 70,000 Accounts Payable $ 3,080,000 Marketable Securities 112,000 Accrued Expenses 210,000 Accounts Receivable 4,000,000 Notes Payable (Due 02/15/13) 560,000 Inventory 1,400,000 Bonds (10%) 3,300,000 Gross Plant and Equipment 8,400,000 Common Stock (2,380,000 Shares, par value $1. Document Preview: Homework Problem - Chapter Five. This is a comprehensive problem that provides a review of the material covered in the course to date, Southface Sportswear Corporation Balance Sheet - December 31, 2012 Assets Liabilities and Stockholder's Equity Cash $ 70,000 Accounts Payable $ 3,080,000 Marketable Securities 112,000 Accrued Expenses 210,000 Accounts Receivable 4,000,000 Notes Payable (Due 02/15/13) 560,000 Inventory 1,400,000 Bonds (10%) 3,300,000 Gross Plant and Equipment 8,400,000 Common Stock (2,380,000 Shares, par value $1.00) 2,380,000 Accumulated Depreciation 2,800,000 Retained Earnings 1,652,000 Total Assets $11,182,000 Total Liabilities and Stockholder's Equity $ 11,182,000 Southface Sportswear Corporation Income Statement - for the Period January 1 - December 31, 2012 Sales (All credit sales) $9,800,000 Fixed Costs1 2,940,000 Variable Costs (0.60) 5,880,000 Earnings Before Interest and Taxes 980,000 Less: Interest 350,000 Earnings Before Taxes $ 630,000 Less: Taxes @ 36% 226,800 Earnings After Taxes 403,200 Dividends (40% payout) 161,280 Increased Retained Earnings $ 241,920 1 Fixed costs include both lease expenses of $280,000 and depreciation of $650,000 The table below shows selected ratios for the firms in this industry. Profit Margin 6.10% Return on Equity 8.90% Return on Assets 6.50% Inventory Turnover 5.00X Receivables Turnover 4.90X Fixed Asset Turnover 2.10X Total Asset Turnover 1.06X Debt to Total Assets 28% Current Ratio 1.50X Quick Ratio 1.10X Times Interest Earned 4.25X Fixed Charge Coverage 3.00X Instructions: b) Compute the overall break-even point and the cash break-even point (in dollars not in units). Then, compute the DOL, DFL and DCL using the simplified formulas provided for you in the chapter and reiterated in the notes. d) The company is anticipating a 20% increase in sales... Attachments: southface-2.docx
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