Problem 13-2A The comparative statements of Osborne Company are presented here.
ID: 2476519 • Letter: P
Question
Problem 13-2A
The comparative statements of Osborne Company are presented here.
OSBORNE COMPANY
Income Statements
For the Years Ended December 31
2014
2013
$1,896,281
$1,756,241
1,064,281
1,011,741
832,000
744,500
505,741
484,741
326,259
259,759
23,557
21,557
302,702
238,202
93,557
74,557
$ 209,145
$ 163,645
OSBORNE COMPANY
Balance Sheets
December 31
Assets
2014
2013
$ 60,100
$ 64,200
74,000
50,000
123,541
108,541
127,557
117,057
385,198
339,798
662,479
533,779
$1,047,677
$873,577
Liabilities and Stockholders’ Equity
$ 165,741
$151,141
45,057
43,557
210,798
194,698
233,479
213,479
444,277
408,177
290,000
300,000
313,400
165,400
603,400
465,400
$1,047,677
$873,577
All sales were on account. Net cash provided by operating activities for 2014 was $226,970. Capital expenditures were $135,980, and cash dividends were $61,145.
Compute the following ratios for 2014. (Round all answers to 2 decimal places, e.g. 1.83 or 12.61%.)
OSBORNE COMPANY
Income Statements
For the Years Ended December 31
2014
2013
Net sales$1,896,281
$1,756,241
Cost of goods sold1,064,281
1,011,741
Gross profit832,000
744,500
Selling and administrative expenses505,741
484,741
Income from operations326,259
259,759
Other expenses and losses Interest expense23,557
21,557
Income before income taxes302,702
238,202
Income tax expense93,557
74,557
Net income$ 209,145
$ 163,645
Explanation / Answer
Ratios for 2014 :
= 209145 / 58000 = $3.61 per share
Earnings per share =Net Income / Number of outstanding stock= 209145 / 58000 = $3.61 per share
Return on common stockholders’ equity = Net Income / common stockholders’ equity = 209145 / 290000 = 72.12% Return on assets Net Income / Average assets = 209145 / 960627 =21.77% Current ratio current assets/current Liabilities =385198 / 210798 = 1.83 Accounts receivable turnover Sales/Average Accounts receivable =1896281/(123541+108541/2) = 16.34 times Average collection period Accounts Receivable * 365 / sales = 123541 * 365 / 1896281 = 23.78 days Inventory turnover cost of goods sold / Average inventory =1,064,281 / 122307 = 8.70 times Days in inventory Inventory * 365 / cost of goods sold 127557 * 365 / 1064281 = 43.75 days Times interest earned EBIT / Interest = 326259 / 23557 = 13.85 TIMES Asset turnover Sales / average assets = 1896281 / 960627 = 1.97 times Debt to assets Debt / Assets 444277 / 1047677 = 42.41% Current cash debt coverage current cash /External Equity 60,100 / (444277 + 23557) 12.84% Cash debt coverage same same Free cash flow cash free of capital expenditure + dividends = 226970 - 135980 - 61145 = $29845