Problem 14-6A The comparative statements of Corbin Company are presented below.

Question

Problem 14-6A The comparative statements of Corbin Company are presented below. CORBIN COMPANY Income Statement For the Years Ended December 31 2017 2016 $599,900 $519,600 Net sales (all on account) Expenses Cost of goods sold Selling and administrative Interest expense Income tax expense 353,000 114,800 6,100 14,500 488,400 $31,200 414,900 119,900 7,200 18,600 560,600 39,300 Total expenses Net income CORBIN COMPANY Balance Sheets Assets 2017 2016 Current assets Cash Short-term investments Accounts receivable (net) Inventory 17,400 85,400 89,400 212,300 422,000 $634,300 $ 20,100$ 17,800 14,000 74,600 70,200 176,600 382,300 $558,900 Total current assets Plant assets (net) Total assets Liabilities and Stockholders' Equity Current liabilities Accounts payable Income taxes payable $123,000 23,300 146,300 $109,600 20,400 130,000 Total current liabilities Long-term liabilities Bonds payable 120,400 266,700 80,500 Total liabilities

Explanation / Answer

Part A

Current Ratio = current assets / current liabilities = 212300/146300 = 1.5 : 1

Part B

Acid test ratio = (current assets - inventory) / current liabilities = (212300-89400)/146300 = 0.84:1

Part C

Accounts receivable turnover = sales / Average accounts receivable = 599900/ ((85400+74600)/2) = 7.5 times

Part D

Inventory turnover = cost of goods sold / Average inventory = 414900/((89400+70200)/2) = 5.2 times

Part E

Profit margin = net income / sales * 100 = 39300/599900*100 = 6.6%

Part F

Asset turnover = sales / Average assets = 599900/((634300+558900)/2) = 1.0 times

Part G

Return on assets = net income / Average assets *100 = 39300/((634300+558900)/2) * 100 = 6.6%

Part H

Return on Common Stockholders' Equity = net income / Average stockholders' equity = 39300/((367600+348400)/2) = 11.0%

Part I

Earnings per share = net income / shares outstanding = 39300/(149000/5) = $1.32

Part J

Price earning ratio = market price per share / EPS = 20.16/1.32 = 15.3 times

Part K

Payout ratio = dividend / net income * 100= (199400+39300-218600)/39300 * 100 = 51.1%

Part L

Debt to assets ratio = total liabilities / total stockholders' equity * 100 = 266700/367600 * 100 = 61.7%

Part M

Times interest earned ratio = EBIT / interest = (39300+18600+7200) /7200 = 9.0 times

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