The following information pertains to Diane Company. Assume that all balance she
ID: 2473970 • Letter: T
Question
The following information pertains to Diane Company. Assume that all balance sheet amounts represent both average and ending balance figures and that all sales were on credit.
Assets
Cash and short-term investments
$ 30,000
Accounts receivable (net)
20,000
Inventory
15,000
Property, plant, and equipment
185,000
Total assets
$250,000
Liabilities and Stockholders’ Equity
Current liabilities
$ 45,000
Long-term liabilities
70,000
Stockholders’ equity—Common
135,000
Total liabilities and stockholders’ equity
$250,000
Income Statement
Sales
$85,000
Cost of goods sold
45,000
Gross margin
$40,000
Operating expenses
(15,000)
Interest expense
(5,000)
Net income
$20,000
Number of shares of common stock outstanding
6,000
Market price of common stock
$20
Total dividends paid
$9,000
Cash provided by operations
$30,000
What is the ratio of sales to total assets for Diane Company?
Cash and short-term investments
$ 30,000
Accounts receivable (net)
20,000
Inventory
15,000
Property, plant, and equipment
185,000
Total assets
$250,000
Explanation / Answer
The ratio of sales to total assets = Sales / Total Assets
= $ 85,000 / $ 250,000
= 0.34
Hence, the correct answer is 0.34
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