Selected year-end financial statements of Cabot Corporation follow. (All sales w
ID: 2488224 • 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, $48,900; total assets, $189,400; common stock, $90,000; and retained earnings, $22,748.)
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. Round to one decimal place; for part 6, round to two decimals
Check
Acid-test ratio, 2.2 to 1; Inventory turnover, 7.3
Explanation / Answer
Current ratio = current assets/ current liabilities
=150,650/24,000
=6.3
Acid test ratio = cash +investment+account receivable+note receivable / current liabiliites
=(10,000+8,400+29,200+4,500)/24,000
=2.2
Days sales collected = 365* account receivable/ net sales
=365*29,200/448,600
=23.8 days
Inventory turnover = cost of goods sold/ average inventory
=297,250/40,525
=7.3 times
Days sales in inventory = 365/ inventory turnover
=365/7.3
=50 days
Debt to equity ratio = total liabilities / total equity
=87,400/152,800
=57.20%
Times interest earned = net income before interest and tax/ interest expense
=52,750/4,100
=12.9 times
Profit margin ratio = net income / net sales
29,052/448,600
6.5%
Asset turnover = net sales / average total assets
= 448,600/214,800
=2.1
Return on total assets= net income / average total assets
= 29,052/214,800
=13.5%
Return on common stockholder’s equity = net income / average stockholer’s Equity
=29,052/132,774
=21.9%
Current ratio = current assets/ current liabilities
=150,650/24,000
=6.3
Acid test ratio = cash +investment+account receivable+note receivable / current liabiliites
=(10,000+8,400+29,200+4,500)/24,000
=2.2
Days sales collected = 365* account receivable/ net sales
=365*29,200/448,600
=23.8 days
Inventory turnover = cost of goods sold/ average inventory
=297,250/40,525
=7.3 times
Days sales in inventory = 365/ inventory turnover
=365/7.3
=50 days
Debt to equity ratio = total liabilities / total equity
=87,400/152,800
=57.20%
Times interest earned = net income before interest and tax/ interest expense
=52,750/4,100
=12.9 times
Profit margin ratio = net income / net sales
29,052/448,600
6.5%
Asset turnover = net sales / average total assets
= 448,600/214,800
=2.1
Return on total assets= net income / average total assets
= 29,052/214,800
=13.5%
Return on common stockholder’s equity = net income / average stockholer’s Equity
=29,052/132,774
=21.9%
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