The comparative statements of Osborne Company are presented here. OSBORNE COMPAN
ID: 2488434 • Letter: T
Question
The comparative statements of Osborne Company are presented here.
OSBORNE COMPANY
Income Statements
For the Years Ended December 31
2014
2013
$1,894,056
$1,754,016
1,062,056
1,009,516
832,000
744,500
503,516
482,516
328,484
261,984
23,962
21,962
304,522
240,022
93,962
74,962
$ 210,560
$ 165,060
OSBORNE COMPANY
Balance Sheets
December 31
Assets
2014
2013
$ 60,100
$ 64,200
74,000
50,000
121,316
106,316
127,962
117,462
383,378
337,978
659,385
530,685
$1,042,763
$868,663
Liabilities and Stockholders’ Equity
$ 163,516
$148,916
45,462
43,962
208,978
192,878
230,385
210,385
439,363
403,263
290,000
300,000
313,400
165,400
603,400
465,400
$1,042,763
$868,663
All sales were on account. Net cash provided by operating activities for 2014 was $239,240. Capital expenditures were $135,420, and cash dividends were $62,560.
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$1,894,056
$1,754,016
Cost of goods sold1,062,056
1,009,516
Gross profit832,000
744,500
Selling and administrative expenses503,516
482,516
Income from operations328,484
261,984
Other expenses and losses Interest expense23,962
21,962
Income before income taxes304,522
240,022
Income tax expense93,962
74,962
Net income$ 210,560
$ 165,060
Explanation / Answer
(a) EPS = Net Income/ Number of shares
= $210560 / 58000 = $3.63
Number of shares = $290000 / $5 = 58000
(b) Return on common stockholders’ equity = net Income / equity * 100
= $210560 / $603400 * 100 = 34.90%
(c) Return on assets = Net Income / Average Assets * 10
Average Assets = 1042763 + 868663 / 2 = $955713
Return on Assets = 210560 / 955713 * 100 = 22.03%
(d) Current ratio = Current Assets / Current Liabilities
= 383378 / 208978 = 1.83 : 1
(e) Accounts receivable turnover = Sales / Average Accounts Receivable
Average Accounts Receivable = 121316 + 106316 / 2 = $113816
Accounts receivable turnover = 1894056 / 113816 = 16.64 times
(f) Average collection period = 365 * Average Accounts Receivable / Sales
= 365 * 113816 / 1894056 = 21.93 days
(g) Inventory turnover = Sales / Average Inventory
Average Inventory = 127962 + 117462 / 2 = $122712
Inventory turnover = 1894056 / 122712 = 15.43 times
(h) Days in inventory = 365 / inventory turnover
= 365 / 15.43 = 23.66 days
(I) Times interest earned = EBIT / Interest
= 304,522 / 23962 = 12.71 times
(j) Asset turnover = Sales / Average Assets
= 1894056 / 955713 = 1.98 times
(k) Debt to assets = Debt / Assets * 100
= 230,385 / 1,042,763 * 100 = 22.09%
(l) Current cash debt coverage = Net cash provided by operating activities / Average Current Liabilities
Average Current Liabilities = 208,978 + 192,878 / 2 = 200928
Current cash debt coverage = 239,240 / 200928 = 1.19 times
(m) Cash debt coverage = Net cash provided by operating activities / Average total Liabilities
Average total Liabilities = 439,363 + 403,263 / 2 = $421313
Cash debt coverage = 239,240 / 421313 = .57 times
(n) Free cash flow = Cash provided by operating activities + capital expenditure
= $239240 + $135420 = $374660