36. Here are simplified financial statements of Phone Corporation from a recent
ID: 2448555 • Letter: 3
Question
36.
Here are simplified financial statements of Phone Corporation from a recent year:
INCOME STATEMENT
(Figures in millions of dollars)
Net sales
13,000
Cost of goods sold
3,960
Other expenses
4,037
Depreciation
2,458
Earnings before interest and taxes (EBIT)
2,545
Interest expense
675
Income before tax
1,870
Taxes (at 30%)
561
Net income
1,309
Dividends
856
BALANCE SHEET
(Figures in millions of dollars)
End of Year
Start of Year
Assets
Cash and marketable securities
87
156
Receivables
2,282
2,450
Inventories
177
228
Other current assets
857
922
Total current assets
3,403
3,756
Net property, plant, and equipment
19,953
19,895
Other long-term assets
4,196
3,750
Total assets
27,552
27,401
Liabilities and shareholders’ equity
Payables
2,544
3,020
Short-term debt
1,409
1,563
Other current liabilities
801
777
Total current liabilities
4,754
5,360
Long-term debt and leases
7,516
7,191
Other long-term liabilities
6,158
6,129
Shareholders’ equity
9,124
8,721
Total liabilities and shareholders’ equity
27,552
27,401
Calculate the following financial ratios: (Use 365 days in a year. Do not round intermediate calculations. Round your answers to 2 decimal places.)
a.
Long-term debt ratio
b.
Total debt ratio
c.
Times interest earned
d.
Cash coverage ratio
e.
Current ratio
f.
Quick ratio
g.
Operating profit margin
%
h.
Inventory turnover
i.
Days in inventory
days
j.
Average collection period
days
k.
Return on equity
%*
l.
Return on assets
%
m.
Return on capital
%**
n.
Payout ratio
* - use average equity
** - use average capital
Here are simplified financial statements of Phone Corporation from a recent year:
Explanation / Answer
a. long term debt ratio= long tern debt/Total asset
=7516/27552
=27.27%
b.Total debt ratio=Total liabilities / Total assets
=25008/27552
=90.76%
c.Timers interest earned= income before interest and income taxes / interest expenses
=2545/675
=3.77
d. Cash coverage ratio= earning before interest and taxes+Non cash expenses/interest expenses
=2545+2458/675
=7.41
e.cuttent ratio= current Asset/Current liability
=3403/4754
=71.58
f, Quick ratio = quick asset/current liabilities
=3226/4754
=67.86
g.Operating profir margin= operating income/ net sale
=2545/13000
=1.95
h.inventory turnover =COGS/Average invetory
=3960/202.5
=19.5
i.Days in Inventory=365/inventory turnover ratio
=365/19.5
=19
j.Average collection period =365/Account receivable ratio
=365/(13000/2282)
=365/5.70
=64days
k Return on equity = net income / shareholder equity
=1309/8922.5
=14.67%
l Return on asset= Net Income / total asset
=1309/27552
=4.75%
m. return on capital= net income-dividend/Total capital
=1309-856/16276
=2.78%
n Pay out ratio:Dividend / net income
=856/1309
=65.39%
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