Wiemer’s 2017 income statement included net sales of 104,000 cost of goods sold

Question

Wiemer’s 2017 income statement included net sales of 104,000 cost of goods sold of 59,600 and net income of 16,000
Compute the following ratios for 2017 A) Current Ratio B) Acud test Ratio C) Accounts receivable turnover D) Inventory turnover E) profit margin F) Asset turnover G) Return on assets H) Return on common stockholders equity I) debt to assets ratio Wiemer’s 2017 income statement included net sales of 104,000 cost of goods sold of 59,600 and net income of 16,000
A) Current Ratio B) Acud test Ratio C) Accounts receivable turnover D) Inventory turnover E) profit margin F) Asset turnover G) Return on assets H) Return on common stockholders equity I) debt to assets ratio
Exercise 18-11 Wiemers Corporation's comparative balance sheets are presented below. WIEMERS CORPORATION Balance Sheets December 31 2017 2016 Cash Accounts receivable (net) Inventory Land Buildings Accumulated depreciation-buildings $ 3,400 23,800 7,000 26,500 69,600 69,600 (14,500) (10,000) $109,500 $120,300 $12,100 31,000 70,000 19,300 3,700 20,800 10,300 19,600 Total Accounts payable Common stock Retained earnings 74,800 22,600 Total 109,500 $120,300 Wiemers's 2017 income statement included net sales of $104,000, cost of goods sold of $59,600, and net income of $16,000. Compute the following ratios for 2017, (Round answers to 2 decimal places, eg. 1.65, or 1.65% .) Current ratio Acid-test ratio times Accounts receivable turnover Inventory turnover Profit margin Asset turnover Return on assets times times

Explanation / Answer

Solution:

Current ratio = Current assets / Current liabilities

Current assets = Cash + Accounts receivables + Inventory = $3,700 + $20,800 + $10,300 = $34,800

Current liabilities = Accounts payable = $12,100

Current ratio = $34,800 / $12,100 = 2.88:1

Acid test ratio = Quick assets / Current liablities

Quick assets = Current assets - Inventory = $34,800 - $10,300 = $24,500

Acid test ratio = $24,500 / $12,100 = 2.02:1

Accounts receivables turnover = Net Sales / Average accounts receivables

Average accounts receivables = ($20,800 + $23,800)/2 = $22,300

Accounts receivables turnover = $104,000 / $22,300 = 4.66 times

Inventory turnover = Cost of goods sold / Average inventory

Average inventory = ($10,300 + $7,000)/2 = $8,650

Inventory turnover = $59,600 / $8,650 = 6.89 times

Profit margin = Net Income / Sales = $16,000 / $104,000 = 15.38%

Assets turnover = Sales / Average total assets

Average total assets = ($109,500 + $120,300)/2 = $114,900

Asset turnover = $104,000 / $114,900 = 0.91 times

Return on Assets = Net Income / Average total assets = $16,000 / $114,900 = 13.93%

Return on common stockholder's Equity = Net Income / Average stockholder's equity

Average stockholder's equity = [($74,800 + $22,600) + ($70,000 + $19,300)]/2 = $93,350

Return on common stockholder's equity = $16,000 / $93,350 = 17.14%

Debt to Asset ratio = Total liablities / Total Assets = $12,100 / $109,500 =11.05%

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