Financial statements for Thornton Company follow. Required Calculate the followi
ID: 2555162 • Letter: F
Question
Financial statements for Thornton Company follow.
Required
Calculate the following ratios for 2019 and 2018. Since 2017 numbers are not presented, do not use averages when calculating the ratios for 2018. Instead, use the number presented on the 2018 balance sheet.
Working capital.
Current ratio. (Round your answers to 2 decimal places.)
Quick ratio. (Round your answers to 2 decimal places.)
Receivables turnover (beginning receivables at January 1, 2018, were $50,000). (Round your answers to 2 decimal places.)
Average days to collect accounts receivable. (Round your intermediate calculations to 2 decimal places and your final answers to the nearest whole number.)
Inventory turnover (beginning inventory at January 1, 2018, was $156,000). (Round your answers to 2 decimal places.)
Number of days to sell inventory. (Round your intermediate calculations to 2 decimal places and your final answers to the nearest whole number.)
Debt to assets ratio. (Round your answers to the nearest whole percent.)
Debt to equity ratio. (Round your answers to 2 decimal places.)
Number of times interest was earned. (Round your answers to 2 decimal places.)
Plant assets to long-term debt. (Round your answers to 2 decimal places.)
Net margin. (Round your answers to 2 decimal places.)
Turnover of assets. (Round your answers to 2 decimal places.)
Return on investment. (Round your answers to 2 decimal places.)
Return on equity. (Round your answers to 2 decimal places.)
Earnings per share. (Round your answers to 2 decimal places.)
Book value per share of common stock. (Round your answers to 2 decimal places.)
Price-earnings ratio (market price per share: 2018, $12.55; 2019, $14.10). (Round your intermediate calculations and final answer to 2 decimal places.)
Dividend yield on common stock. (Round your answers to 2 decimal places.)
THORNTON COMPANY Balance SheetsAs of December 31 2019 2018 Assets Current assets Cash $ 24,000 $ 20,000 Marketable securities 21,600 7,600 Accounts receivable (net) 57,000 49,000 Inventories 142,000 150,000 Prepaid items 26,000 11,000 Total current assets 270,600 237,600 Investments 22,000 15,000 Plant (net) 290,000 275,000 Land 29,000 24,000 Total assets $ 611,600 $ 551,600 Liabilities and Stockholders’ Equity Liabilities Current liabilities Notes payable $ 40,000 $ 17,300 Accounts payable 113,800 100,000 Salaries payable 25,000 19,000 Total current liabilities 178,800 136,300 Noncurrent liabilities Bonds payable 140,000 140,000 Other 31,000 26,000 Total noncurrent liabilities 171,000 166,000 Total liabilities 349,800 302,300 Stockholders’ equity Preferred stock, (par value $10, 4% cumulative, non-participating; 6,000 shares authorized and issued) 60,000 60,000 Common stock (no par; 50,000 shares authorized; 10,000 shares issued) 60,000 60,000 Retained earnings 141,800 129,300 Total stockholders’ equity 261,800 249,300 Total liabilities and stockholders’ equity $ 611,600 $ 551,600
Explanation / Answer
(1) Receivables Turnover = credit sales/Average Accounts Receivable
2018: 370000/(50000+49000)/2 = 7.47
2019: 390000/(49000+57000)/2 = 7.35
(2) Average days to collect Accounts Receivable ;
= 365/Receivables Turnover
2018: 365/7.47 = 49 days
2019: 365/7.35 = 50 days
(3) Inventory Turnover = Cost of goods sold/Average Inventory
2018: 151000/(156000+150000)/2 = 0.98
2019: 195000/(150000+142000)/2 = 1.33
(4) Average days to sell Inventory = 365/Inventory Turnover
2018: 365/0.98 = 372 days
2019: 365/1.33 = 274 days
(5) Number of times Interest earned = EBIT/Interest Expense
2018: 113200/12000 = 9.43
2019: 90400/12800 = 7.06
(6) Plant assets to Long-term debt = plant Assets/Long-term debt*
2018: 275000/166000 = 1.65
2019: 290000/171000 = 1.69
*Long-term debt = total non-current liabilities
(7) Book value per share = (Stockholder's Equity - preferred stock)/No. Of common stock
2018: (249300-60000)/10000 = $18.93
2019: (261800-60000)/10000 = $20.18
(8) Dividend Yield on common stock = Cash dividend per share/Market value per share
2018: (4500/10000)/12.55 = 3.58%
2019: (4500/10000)/14.10 = 3.19%
(9) Asset Turnover (2018) = Sales/Total asset
= 370000/551600 = 0.67
(2019): 390000/611600 = 0.63
(10) Return on Investment(2018) = Net Income/cost of Investment = 47200/15000 = 314.66%
(2019): 19400/22000 = 88.18%
(11) Return on Equity = Net Income/Stockholder's Equity
2018: 47200/249300 = 18.93%
2019: 19400/261800 = 7.41%
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