Selected year-end financial statements of McCord Corporation follow. (All sales

Question

Selected year-end financial statements of McCord Corporation follow. (All sales were on credit; selected balance sheet amounts at December 31, 2010, were inventory, $47,900; total assets, $189,400; common stock, $115,000; and retained earnings, $53,148.)

McCORD CORPORATION
Income Statement
For Year Ended December 31, 2011 Sales $ 452,600 Cost of goods sold 296,850 Gross profit 155,750 Operating expenses 99,400 Interest expense 4,400 Income before taxes 51,950 Income taxes 20,928 Net income $ 31,022

Explanation / Answer

1. current ratio Current Assets / Current Liabilities 80,900 / 21,000 = 3.85 : 1 2.total asset turnover Net Sales / Avg. Total Assets (182,400 + 233,200) / 2 = 207,800 Avg. Total Assets 348,600 / 207,800 = 1.68 times 3. return on total assets Net Income / Avg. Total Assets 48,050 / 207,800 = 23.12% 4. return on common stockholder's equity. (Net Income - Preferred Dividends) / Avg. Stockholders' Equity (121,000 + 149,800) / 2 = 135,400 Avg. Equity 48,050 / 135,400 = 35.49%

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