INCOME STATEME (Eigures in S millions) Net sales $13,200 Cost of goods sold Othe
ID: 2329884 • Letter: I
Question
INCOME STATEME (Eigures in S millions) Net sales $13,200 Cost of goods sold Other expenses Depreciation 4,072 2,548 Barnings before interest and taxes 2,470 (EBIT) Interest expense Income before tax Taxes (at 35%) Net income Dividends 690 1,780 623 1,157 $ 866 BALANCE SHEET (Figures in millions) End of Year Start of Year Assets cash and marketable securities Receivables Inventories Other current assets 159 2, 510 243 937 90 $ 2, 432 872 19,983 Total current assets Net property, plant, and equipment Other long-term assets $ 3,5863, 849 19,925 3,780 27,795 27,554 4,226 Total assets Liabilities and shareholders' equity Payables Short-term debt other current 1iabilities 2,574 3,050 1,578 1, 424 Total current liabilities Long-term debt and leases Other long-term liabilities Shareholders' equity $ 4,814 5,420 6, 654 6,159 9, 321 6,769 6, 188 10,024Explanation / Answer
Answer:
Let us first calculate the average balance sheet figures that we will require in the calculations
Capital employed is the sum of all long term liabilities and shareholder's equity. So, above we have used capital employed as the sum of long term debt and leases, other long term liabilities and shareholder's equity.
earnings before interest and taxes / interest expense
($3,586-$192-$0) / $4,814
Formula Calculation a. Return on equity (net income / average shareholder's equity) * 100 ( $1,157 / $9672.5 ) * 100 11.96 % b. Return on assets ( net income / average total assets ) * 100 ( $1,157 / $27,674.5 ) * 100 4.18 % c. Return on capital ( earning before interest and taxes / average capital employed ) * 100 ( $2,470 / $22,557.5 ) * 100 10.95 % d. Days in inventory ( opening inventory / cost of goods sold ) * days in accounting period ( $243 / $4,110 ) * 365 21.58 days e. Inventory turnover ( cost of goods sold / opening inventory ) ( $4,110 / $243 ) 16.91 f. Average collection period ( opening receivables / credit sales ) * 365 ( $2,510 / $13,200 ) *365 69.41 days g. Operating profit margin ( earnings before interest and taxes / sales ) * 100 ( $2,470 / $13,200 ) * 100 18.71 % h. Long term debt ratio closing long term debts / closing total assets ($6,769+$6,188) / $27,795 0.47 i. Total debt ratio closing total debts / closing total assets ( $2,574 + $1,424 + $816 + $6,769 + $6,188 ) / $27,795 0.64 j. Times interest earnedearnings before interest and taxes / interest expense
$2,470 / $690 3.58 k. Cash coverage ratio ( earnings before interest and taxes + non cash expenditures ) / interest expense ( $2,470 + $2,548 ) / $690 7.27 l. Current ratio closing current assets / closing current liabilities $3,586 / $4,814 0.74 m. Quick ratio ( closing current assets - closing inventory - closing prepaid expenses ) / current liabilities($3,586-$192-$0) / $4,814
0.71