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

Question

Selected year-end financial statements of Cabot Corporation follow. (All sales were on credit; selected balance sheet amounts at December 31, 2014, were inventory, $48,900; total assets, $189,400; common stock, $90,000; and retained earnings, $22,748.) CABOT CORPORATION Income Statement For Year Ended December 31, 2015 Sales Cost of goods sold $448,600 297,250 Gross proft Operating expenses Interest expense 151,350 98,600 4,100 Income before taxes Income taxes 48,650 19,598 Net income $ 29,052 CABOT CORPORATION Balance Sheet December 31, 2015 Assets Cash Short-term investments Accounts receivable, net Notes receivable (trade)* Merchandise inventory Prepaid expenses Plant assets, net $10,000 8,400 29,200 4,500 32,150 2,650 153,300 Liabilities and Equity Accounts payable Accrued wages payable Income taxes payable Long-term note payable, secured $17,500 3,200 3,300 by mortgage on plant assets Common stock 63,400 90,000 62,800 Retained earnings Total assets $ 240,200 Total liabilities and equity $ 240,200 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.) urrent Ratio Choose Numerator: 1 Choose Denominator: -Current Ratio = Current Ratio 2015

Explanation / Answer

1)Current Ratio= Current Assets/Current liabilites
=(10000+8400+29200+4500+32150+2650)/(17500+3200+3300)
=3.621

2)Acid test ratio=(Current Assets-inventory)/Current liabilites
=(10000+8400+29200+4500+2650)/(17500+3200+3300)
=2.281

3)Days sales uncollected= Account receivable/sales*365
=((29200+4500)/448600)*365
=27.419 days

4)Inventory Turnover=COGS/Average inventroy
=297250/(32150+48900)/2)
=7.335

5)Days sales Inventory=365/inventory turnover
=365/7.335
=49.761 days

6)Debt to equity= Debt/Equity
=87400/152800
=0.572

7)Times Interest earned=EBIT/Interest
=98600/4100
=24.048

8)Profit margin= Net profit/Sales
=29052/448600
=6.476%

9)Total assets turnover= Sales/Average assets
=448600/((189400+240200)/2)
=2.0884

10)Return on total Assets= Net profit/ Assets
=29052/((240200+189400)/2)
=13.525%

11)Return on common Stockholder equity= Net profit/ Average Equity
=29052/((112748+152800)/2)
=21.881%

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