Selected year-end financial statements of Cabot Corporation follow. (All sales w
ID: 2466551 • Letter: S
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, $56,900; total assets, $199,400; common stock, $82,000; and retained earnings, $51,012.)
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.)
Selected year-end financial statements of Cabot Corporation follow. (All sales were on credit; selected balance sheet amounts at December 31, 2014, were inventory, $56,900; total assets, $199,400; common stock, $82,000; and retained earnings, $51,012.)
Explanation / Answer
= ( 82000 + 51012 + 82000 + 78750) / 2
= 146881
1) Current ratio = Current Asset / Current liabilities Current Assets Cash 18000 short term investments 8600 Accounts receivable 31000 Notes receivable 7000 Inventory 30150 prepaid expenses 2900 Total current asssets 97650 Current liabilities Accounts payable 16500 Accrued wages payable 4600 Income tax payable 3700 Total current liabilities 24800 Current ratio = 97650 / 24800 = 3.94 2) Acid test ratio = quick assets/ current liabilities Quick assets Cash 18000 short term investments 8600 Accounts receivable 31000 Notes receivable 7000 Total quick assets 64600 Current liabilities Accounts payable 16500 Accrued wages payable 4600 Income tax payable 3700 Total current liabilities 24800 Acid test ratio = 64600 / 24800 = 2.60 3) Days sales uncollected = Accounts receivable / net sales * 365 = ( 31000 + 7000 ) / 448600 * 365 = 30.92 4) inventory turnover = cost of goods sold / Average inventory Average inventory = ( opening inventory + closing inventory ) /2 = ( 56900 + 30150) /2 = 43525 Inventory turnover = 298050 / 43525 = 6.85 5) Days sale in inventory = Ending inventory / cost of goods sold * 365 = 30150 / 298050 * 365 = 36.92 6) Debt to equity ratio = Total liabilities / Total equity Total liabilities Accounts payable 16500 Accrued wages payable 4600 Income tax payable 3700 long term note payable 64400 Total liabilities 89200 total equity Common stock 82000 retained earnings 78750 total equity 160750 Debt to equity ratio = 89200 / 160750 = 0.55 7) times interest earned = earning before interest and tax / interest expense = ( income before taxes + interest) / interest expense = ( 46450 + 4900 ) / 4900 = 51350 / 4900 = 10.48 8) Profit margin ratio = Net Income / Net sales = 27738 / 448600 =0.06 9) Total asset turnover = Net sales / Average total assets Average total assets = (opening total asset + closing total assets) /2 = ( 199400 + 249950)/2 = 224675 Total asset turnover = 448600 / 224675 = 2 10) Return on total assets = Net Income / Average total assets = 27738 / 224675 = 0.12 11) Return on common equity = Net Income / Shareholders equity Average shareholders equity = ( opening equity + retained earnings + closing equity + retained earnings)/2= ( 82000 + 51012 + 82000 + 78750) / 2
= 146881
return on common equity = 27738 / 146881 = 0.19Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.