Problem 13-4A Calculation of financial statement ratios LO P3 Selected year-end
ID: 2591993 • Letter: P
Question
Problem 13-4A Calculation of financial statement ratios LO P3
Selected year-end financial statements of Cabot Corporation follow. (All sales were on credit; selected balance sheet amounts at December 31, 2016, were inventory, $55,900; total assets, $179,400; common stock, $80,000; and retained earnings, $35,654.)
* These are short-term notes receivable arising from customer (trade) sales.
Required:
Compute the following: (1) current ratio, (2) acid-test ratio, (3) days' sales uncollected, (4) inventory turnover, (5) days' sales in inventory, (6) debt-to-equity ratio, (7) times interest earned, (8) profit margin ratio, (9) total asset turnover, (10) return on total assets, and (11) return on common stockholders' equity. (Do not round intermediate calculations.)
Income Statement
For Year Ended December 31, 2017 Sales $ 447,600 Cost of goods sold 297,450 Gross profit 150,150 Operating expenses 99,000 Interest expense 4,100 Income before taxes 47,050 Income taxes 18,954 Net income $ 28,096
Explanation / Answer
297450/43025*=6.91
*(55900+30150)/2=43025
447600/209775*=2.13
*(179400+240150)/2=209775
(28096/209775**)*100=13.39%
**(179400+240150)/2=209775
(28096/129702**)*100=21.66
**(115654+143750)/2=129702
S.No. Formula Ratio 1 Current ratio = Current Asset/Current Liablities (12000+86000+33200+3000+30150+2900)/(17500+3000+4500)=3.59 2 Quick ratio = Total Current Asset-Inventroy-Prepaid Expense/Current Liabalities {(12000+8600+33200+3000+30150+2900)-2900-30150}/(17500+3000+4500)=2.27 3 Days sales uncollected=Accounts receivable/Net annual credit sales) x 365 (33200/447600)*365=27.07 4 Inventory turnover= Cost of Goods Sold/Average Inventory297450/43025*=6.91
*(55900+30150)/2=43025
5 Number of days’ sales in inventory=Ending Inventory/Cost of Goods Sold*365 (30150/297450)*365=37 days 6 Debt-to-Equity Ratio =Total Liabilities/ Shareholders' Equity (17500+3000+4500+71400)/(80000+63750)=0.67 7 Times interest earned= Eaning before interest and Tax expense/Interest expense (150150-99000)/4100=12.48 8 Profit margin ratio=Net Income/Net Sales (28096/447600)*100=6.28 9 Asset turnover=Net Sales/Average Total Asset447600/209775*=2.13
*(179400+240150)/2=209775
10 Return on total assets= Net Income/Average Total Asset(28096/209775**)*100=13.39%
**(179400+240150)/2=209775
11 Return on common stockholders’ equity= Net Income-Preferred Dividend/Average common stockholders’ equity(28096/129702**)*100=21.66
**(115654+143750)/2=129702