The Financial Statements of Midwest Tours Are Given Below

question 57

Multiple Choice

The financial statements of Midwest Tours are given below. $\begin{array}{c} \text { Midwest Tours } \\\text { Income Statement (2009) }\\\begin{array}{lrr} \hline \text { Sales } & \$ 2,500,000 \\\text { Cost of goods sold } & \underline {1,260,000} \\\text { Gross profit } & 1,240,000 \\\text { Selling \& administrative expenses } & \underline { 700,000} \\\text { Operating profit } & 540,000 \\\text { Interest expense } & \underline {160,000 }\\\text { Income before tax } & 380,000 \\\text { Tax expense } & \underline {152,000} \\ \text { Net income } & \underline {\$ 228,000} \\\end{array} \end{array}$ $\begin{array}{c}\begin{array}{lll} \text { Balance Sheet } &2009\\\\ \text { Cash } &\$ 60,000 \\ \text { Accounts receivable } & 500,000 \\ \text { Inventory } & \underline {300,000} \\ \text {Total current assets } &\$ 860,000 \\ \text {Fixed assets } & \underline {2,180,000} \\ \text { Total assets } & \underline {\$ 3,040,000} \\\\ \text { Accounts Payable } &\$ 200,000 \\ \text { Bank loan } & \underline {460,000} \\ \text { Total current liabilities } & \$ 660,000 \\ \text {Bond payable } & \underline { 860,000} \\ \text { Total liabilities } & \underline {\$ 1,520,000 }\\ \text { Common stock ( 130,000 shares) } & \$ 120,000 \\ \text {Retained earnings } & \underline {1,400,000}\\ \text { Total liabilities \& equity } & \underline {\$ 3,040,000} \\\end{array}\begin{array}{lll}2008\\\\\$ 50,000 \\450,000 \\ \underline { 270,000 }\\ \$ 770,000 \\ \underline { 2,000,000} \\ \underline { \$ 2,770,000 }\\\\\$ 170,000 \\ \underline { 440,000} \\ \$ 610,000 \\ \underline {860,000} \\ \underline {\$ 1,470,000 }\\\$ 120,000\\ \underline {1,300,000} \\ \underline { \$ 2,890,000 } \\\end{array}\end{array}$ Note: The common shares are trading in the stock market for $36 each. Refer to the financial statements of Midwest Tours. The firm's fixed asset turnover ratio for 2009 is

• A) 1.45.
• B) 1.63.
• C) 1.20.
• D) 1.58.

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Definitions:

Indemnity Plan

Compensation for damage done or loss caused.

Commercial Plan

A detailed proposal for a business venture or project, emphasizing strategies for marketing, operation, and financial management.

Preexisting Condition

Any medical condition or health problem that was present before an individual's health insurance policy's effective date, often affecting coverage or benefits.

Workers' Compensation

A form of insurance providing wage replacement and medical benefits to employees injured in the course of employment.