Miller Company\'s condensed income statement for 2013 and December 31, 2013, bal

Question

Miller Company's condensed income statement for 2013 and December 31, 2013, balance sheet follow:

Additional information: The corporate common stock was outstanding the entire year and is selling for $16 per share at year end. On January 1, 2013, the inventory was $ 21,500 , the total assets were $ 224,000 , the accounts payable were $ 18,800 , and the total shareholders' equity was $ 130,800 . The company operates on a 365-day business year.

Required

5. Return on total assets: (Round to two decimal places. Round tax rate to the nearest whole percent in your intermediate calculations.)
6. Return on common equity: (Round to two decimal places.)


8. Inventory turnover: (in days) (Round to nearest whole day.)
9. Payables turnover: (in days) (Round to nearest whole day. Do not round your intermediate calculations.)
Miller Company's condensed income statement for 2013 and December 31, 2013, balance sheet follow: The corporate common stock was outstanding the entire year and is selling for $16 per share at year end. On January 1, 2013, the inventory was $ 21,500 , the total assets were $ 224,000 , the accounts payable were $ 18,800 , and the total shareholders' equity was $ 130,800 . The company operates on a 365-day business year. Return on total assets: (Round to two decimal places. Round tax rate to the nearest whole percent in your intermediate calculations.) Return on common equity: (Round to two decimal places.) Inventory turnover: (in days) (Round to nearest whole day.) Payables turnover: (in days) (Round to nearest whole day. Do not round your intermediate calculations.)

Explanation / Answer

Hi,

Please find the answer as follows:

Part 5:

Return on Total Assets = Net Income/Total Assets = 21800/238000 = .915 or .92

Part 6:

Return on Common Equity = Net Income/Shareholder's Equity = 21800/(80500 + 24000 + 38700) = .152 or .15

Part 8:

Inventory Turnover Ratio = Cost of Goods Sold/Average Inventory = 183600/(21500 + 19300)/2 = 9 times

Inventory Turnover (Days) = 365/9 = 40.55 or 41 Days

Part 9:

Payables Turnover Ratio = Net Purchases/Average Accounts Payable

Cost of Goods Sold = Opening Inventory + Purchases - Closing Inventory

183600 = 21500 + Purchases - 19300

Purchases = 183600 + 19300 - 21500 = 181400

Payables Turnover Ratio = Net Purchases/Average Accounts Payable = 181400/(18800 + 18000)/2 = 9.859

Payables Turnover(Days) = 365/9.859 = 37 Days

Notes:

Average Inventory = (Opening Inventory + Closing Inventory)/2

Average Accounts Payable = (Opening Accounts Payable + Closing Accounts Payable)/2

Shareholder's Equity = Common Stock + Additional Paid in Capital + Retained Earnings

Thanks.

Related Questions

Navigate

• Browse (All)
• Browse M
• Subjects

---