Ratios Compared with Industry Averages Packard Plastics, Inc., manufactures vari
ID: 2541076 • Letter: R
Question
Ratios Compared with Industry Averages Packard Plastics, Inc., manufactures various plastic and synthetic products. Financial statement data for the firm follow 2016 (Thousands of Dollars, Sales revenue Cost of goods sold Net income Dividends Earnings per share Except Earnings per Share) $825,000 540,000 50,500 15,000 4.25 Packard Plastics, inc. Balance Sheets (Thousands of Dollars) Dec. 31, 2016 Dec. 31, 2015 $2,700 60,900 148,000 140,000 219,000 203.600 215,000 194.000 $4,100 Cash Accounts receivable (net) Inventory 66,900 Plant assets (net)Explanation / Answer
Answer to Part a-3.
Accounts Receivable Turnover Ratio = Net Sales / Average Accounts Receivable
Average Accounts Receivable = (60,900 + 66,900) / 2
Average Accounts Receivable = $63,900
Accounts Receivable Turnover Ratio = 825,000 / 63,900
Accounts Receivable Turnover Ratio = 12.91 times
Answer to Part a-5.
Debt to Equity Ratio = Total Debt / Total Equity
Debt to Equity Ratio = 233,700 / 214,200
Debt to Equity Ratio = 1.09
Answer to Part a-6.
Gross Profit Percentage = Gross Profit / Net Sales * 100
Gross Profit = Net Sales – Cost of Goods Sold
Gross Profit = $825,000 - $540,000 = $285,000
Gross Profit Percentage = 285,000 / 825,000 * 100
Gross Profit Percentage = 34.55%
Answer to Part a-7.
Return on Sales = Net Income / Sales * 100
Return on Sales = 50,500 / 825,000 * 100
Return on Sales = 6.12%
Answer to Part a-8.
Return on Assets = Net Income / Average Total Assets * 100
Average Total Assets = (447,900 + 401,500) / 2
Average Total Assets = $424,700
Return on Assets = 50,500 / 424,700 * 100
Return on Assets = 11.89%
Answer to Part b-2.
Dividend Payout Ratio = Dividend Paid / Net Income available for Distribution
Dividend Payout Ratio = 15,000 / 50,500
Dividend Payout Ratio = 29.70%
Answer to Part b-c.
Price Earnings Ratio = Price per Share / Earning per Share
Price Earnings Ratio = 50.25 / 4.25
Price Earnings Ratio = 11.82
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