Presented below is selected information for Brimmer Company: Required Calculate

Question

Presented below is selected information for Brimmer Company:

Required
Calculate the following ratios for 2016. The 2015 results are given for comparative purposes.

Round answers to one decimal place. Use 365 days in a year.

Changes in Various Ratios Presented below is selected information for Brimmer Company: 2016 2015 Sales revenue Cost of goods sold Interest expense Income tax expense Net income Cash flow from operating activities Capital expenditures $920,000 $840,000 575,000 545,000 20,000 20,000 27,000 30,000 51,000 52,000 65,000 55,000 45,000 45,000 Accounts receivable (net), December 31 126,000 120,000 196,000 160,000 450,000 400,000 750,000 675,000 Inventory, December 31 Stockholders' equity, December 31 Total assets, December 31 Required Calculate the following ratios for 2016. The 2015 results are given for comparative pur Round answers to one decimal place. Use 365 days in a year 2015 2016 1. Gross profit percentage 35.5% 37.5 2. Return on assets 8.3% 8.6 3. Return on sales 6.2% 6.6 96 4. Return on common stockholders equity (no preferred stock was outstanding) 13.9% 14.4 5. Accounts receivable turnover 8.0 7.5 6. Average collection period 45.6 days 0 x days 7. Inventory turnover 3.61 8. Times-interest-earned ratio 4.80 9. Operating-cash-flow-to-capital-expenditures ratio 1.22

Explanation / Answer

Calculation of missing ratios for 2016

Average Collection period:-

=365/Receivable Turnover

Receivables Turnover=

Sales Revenue/Avg Accounts Receivable

920,000/(126,000+120,000)/2

=920,000/123,000=7.48

Average Collection period

=365/7.48=48.8 days

Inventory Turnover

=Cost of Goods Sold/Average Inventory

=575,000/(196,000+160,000)/2

=575,000/178,000=3.23

Times Interest earned ratio

=Income before interest and taxes/Interest Expense

=(61,000+27,000+20,000)/20,000

=108,000/20,000=5.4 times

Operating cash flow to capital expenditure ratio:

=cash flow from operating activities/capital expenditure

=65,000/45,000=1.44

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