Exercise 13-13 Your answer is partially correct. Try again. The condensed financ

Question

Exercise 13-13 Your answer is partially correct. Try again. The condensed financial statements of Sheridan Company for the years 2016 and 2017 are presented below SHERIDAN COMPANY Balance Sheets 2017 2016 Current assets Cash and cash equivalents Accounts receivable (net) $330 $360 420 560 490 160 1,510 1,430 410 380 490 Prepaid expenses 130 Total current assets Property, plant, and equipment (net) 30 510 $2,480 $2,350 $840 $810 480 Stockholders' equity-common 1,060 1,060 $2,480 $2,350 30 530 Intangibles and other assets Total assets Current liabilities Long-term liabilities 580 Total liabilities and stockholders' equity SHERIDAN COMPANY For the Year Ended December 31 (in thousands) 2017 2016 $3,900 S3.560 Sales revenue Costs and expenses Cost of goods sold 990 910 Selling & administrative expenses 2,400 2,330 10 20 Interest expense Total costs and Income before income taxes Income tax expense Net income expenses 3400 3.260 500 300 200 120 S 300 S 180

Explanation / Answer

Answer a. Current Ratio = Current Assets / Current Liabilities 2017 2016 Current Assets               1,510              1,430 Current Liabilities                  840                  810 Current Ratio 1.80 : 1 1.77 : 1 Answer b. Inventory Turnover = Cost of Goods Sold / Average Inventory Average Inventory = (Beg. Inventory + Ending Inventory) / 2 2017 2016 Cost of Goods Sold                  990                  910 Beginning Inventory                  490                  430 Ending Inventory                  560                  490 Average Inventory                  525                  460 Inventory Turnover 1.89 Times 1.98 times Answer c. Profit Margin = Net Profit / Sales 2017 2016 Net Income                  300                  180 Sales Revenue               3,900              3,560 Profit Margin 7.7% 5.1% Answer d. Return on Assets = Net Income / Average Total Assets 2017 2016 Net Income 300 180 Beginning Assets               2,350              2,830 Ending Inventory               2,480              2,350 Average Inventory               2,415              2,590 Return on Assets 12.4% 6.9% Answer e. Return on Common Shareholders' Equity = (Net Income - Preferred Dividend) / Average Common Shareholders' Equity 2017 2016 Net Income 300 180 Beginning Equity               1,060                  980 Ending Equity               1,060              1,060 Average Equity               1,060              1,020 Return on Common shareholders' Equity 28.3% 17.6% Answer f. Debt to Assets Ratio = Total Debt / Total Assets 2017 2016 Total Debt               1,420              1,290 Total Assets               2,480              2,350 Debt to Assets Ratio 57.3% 54.9% Answer g. Times Interest Earned = EBIT / Interest Expenses 2017 2016 EBT                  500                  300 Interest Expense                     10                    20 EBIT                  510                  320 Interest Expense                     10                    20 Times Interest Earned 51 Times 16 Times

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