Thorn Co. Statements of Income and Retained Earnings for the Years Ended 12-31 2

Question

Thorn Co.
Statements of Income and Retained Earnings for the Years Ended 12-31
2008 2007
Revenues = $230,000 $210,000
Other revenues 8,000 5,000
Total revenues 238,000 215,000
Expenses
Cost of goods sold 120,000 103,000
Selling, general, and administrative expenses 55,000 50,000
Interest expense 8,000 7,200
Income tax expense 23,000 22,000
Total expenses 206,000 182,000
Net earnings (net income) 32,000 32,800
Retained earnings, 1-1 108,000 83,000
Less: Preferred stock dividends 2,800 2,800
Common stock dividends 5,000 5,000
Retained earnings, 12-31 $132,000 $108,000
Required
Use the financial statements for Thorn Co. to calculate the following ratios for 2008 and 2007.
a. working capital
b. current ratio
c. quick ratio
d. accounts receivable turnover (beginning receivables at 1-1-2007, were 47,000)
e. average number of days to collect accounts receivable
f. inventory turnover (beginning inventory at 1-1-2007, was $140,000)
g. average number of days to sell inventory
h. debt to assets ratio
j.debt to equity ratio
k. plant assets to long-term debt
l. net margin
m. asset turnover
n. return on investment
o. return on equity
p. earnings per share
q. book value per share of common stock
r. price-earnings ratio ( market price per share: 2007, $11.75; 2008, $12.50)
s. dividend yield on common stock

Explanation / Answer

a. Working Capital = Current Assets- Current Liabilities b.Current Ratio = Current Assets/Current Liabililties c.Quick Ratio= Quick Assets/Current Liabililties d.Accounts Receivable turnover= Net Sales/Average Accounts Receivable For 2008 Year Accounts receivable turnover=$238,000/Average Accounts Receivable Beginning Accounts Receivable amount given as 47,000 Average = Beginning Accounts Receivable +Closing Receivable Closing Accounts Receivable/2 47,000 +0/2 23,500 Accounts Receivable turnover=238,000/23,500=10.12 For 2007 Year=215,000/23,500=9.14 e.Average number of dayls to collect accounts receivables=Average Accounts Receivable/Average Daily Sale Average Daily Sales= Net Sales/365 For 2008 Year Average Daily sales=238,000/365=652.04 For 2007 Year = 215,000/365=589.04 Average number of dayls to collect accounts receivables=Average Accounts Receivable/Average Daily Sale For 2008 Year= 23,500/652.04=36.04 For 2007 Year= 23,500/589.04=39.89 F.Inventory Turnover Ratio= Cost of goods sold/Average Inventory Average Inventory Beginning Inventory +Closing Inventory/2 Average Inventory=140,000 + 0/2=70,000 For 2008 Inventory Turnover Ratio=120,000/70,000=1.71 For 2007 Inventory Turnover Ratio=103,000/70,000=1.47 G. Number of Days Sales in Inventory=Average Inventory/Average Daily Cost of goods sold Average Daily cost of goods sold= Cost of goods sold/365 Average Inventory=140,000 + 0/2=70,000 Average Daily cost of goods sold= Cost of goods sold/365 For 2008 Year=120,000/365=328.76 For 2007 Year=103,000/365=282.19 Number of Days sales in Inventory=Average Inventory/AverageDailllly cost of goods sold Inventory/Average Daily Cost of goods sold For 2008 Year= 70,000/328.76=212.92 For 2007 Year=70,000/282.19=248.05 H. Debts to assets ratio= Debt/Assets J.Debt to equity ratio= Total Debt/Net Worth K.Plant assets to long-term debt=Plant assets/Long term debt L. Net Margin=Net Income/Net Sales For 2008 Year Net Margin=32,000/238,000=0.1344 For 2007 Year Net Margin=32,800/215,000=0.15 M.Asseets turnover Ratio=Net Sales/Average total assets N.Return on Investment=Net Operatring Income/Average operating assets O.Return on equity= Net income- preferred dividends/Average common stockholders' equity P. earnings per share= Net income-preferred dividends/Weighted shares outstanding Q.Book value per share= Common stockholders'equity/Outstanding shares R. Price-earning ratio=Market price per share of common stock/Earnings per share on common stock S. Dividend Yield on common stock=dividend per share of common stock/Market price per share of common stock

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.