Basic Financial Ratios The accounting staff of CCB Enterprises has completed the
ID: 2469403 • Letter: B
Question
Basic Financial Ratios
The accounting staff of CCB Enterprises has completed the financial statements for the 2014 calendar year. The statement of income for the current year and the comparative statements of financial position for 2014 and 2013 follow.
Required:
1. Calculate the following financial ratios for 2014 for CCB Enterprises:
Round items h, j, and k to the nearest whole number. Round all other answers to two decimal places. Assume a 360-day year.
CCB Enterprises Statement of Income For the Year Ended December 31, 2014 (thousands omitted) Revenue: Net sales $797,560 Other 58,980 Total revenue $856,540 Expenses: Cost of goods sold $540,500 Research and development 25,140 Selling and administrative 155,620 Interest 19,620 Total expenses $740,880 Income before income taxes $115,660 Income taxes 46,264 Net income $69,396Explanation / Answer
Times Interest Earned = Income before interest and taxes / Interest Expenses ($115,660+19,620)/19,620 = 6.895 Return on total assets = Net income / Average total Assets $69,396 / (($539,060+$511,040)/2) = 13.22% Return on common stock holders equity = Net income / Common stock holders equity $69,396 / ((44,280+41,850)/2) = 161.14% Debt to Equity Ratio = Total Liabilities / Total Equity 280,480/258,580 = 1.08 : 1 Current Ratio = Current assets / Current Liabilities $144,180/119,990 = 1.20:1 Quick Ratio = (Total Current assets - Inventory - Prepaid Expenses) / Current Liabilities (144,180-4,980-65,250)/119,990 = 0.62:1 Accounts Receiveble Turnover ratio = Net credit sales / Average accounts Receiveble 797,560/((47,980+50,100)/2) = 16.26 Times Number of days sales in receiveble = Average Accounts Receiveble / Net credit sales *365 ((47,980+50,100)/2) / 797,560 *365 = 22.44 Days Inventory turn over ratio = Cost of goods sold / Average inventory 540,500/((65,250+62,200)/2) = 8.48 Times Number of days sales in inventory = Ending inventory / Cost of goods sold * 365 65,250/ 540,500 * 365= 44.06 Days