edugen.wileyplus.co Problem 13-4A The following financial information is for Cul

Question

edugen.wileyplus.co Problem 13-4A The following financial information is for Cullumber Company. CULLUMBER COMPANY Balance Sheets December 31 Assets Cash Debt investments (short-term) Accounts receivable Inventory Prepaid expenses Land Building and equipment (net) Total assets Liabilities and Stockholders Equity Notes payable Accounts payable Accrued liabilities Bonds payable, due 2022 Common stock, $10 par Retained earnings 2019 2018 $69,000 69,000 53,000 41,000 103,000 92,000 239,000 164,000 25,000 29,000 132,000 132,000 263,000 188,000 $884,000 $715,000 $170,000 $101,000 66,000 54,000 42,000 42,000 251,000 170,000 205,000 205,000 150,000 143,000 Total liabilities and stockholders' equity $884,000 $715,000 2018 2019 LIQUIDITY

Explanation / Answer

1 Current ratio = Current assets / current liabilities 2018 2019 Change Current assets 395000 489000 Current Liabilities 197000 278000 Current ratio 2.01 1.76 -12% 2 Accounts receivable turnover = net credit sales /Average accounts receivable Net sales 791000 890000 Beginning accounts receivable 89000 92000 Ending accounts receivable 92000 103000 Average accounts receivable 90500 97500 Accounts receivable turnover 8.7 9.1 4% 3 Inventory turnover = Cost of goods sold / Average inventory Cost of goods sold 576000 643000 Beginning inventory 115000 164000 Ending inventory 164000 239000 Average inventory 139500 201500 Average inventory = (Beginning + Ending )/2 Inventory turnover 4.1 3.2 -23% 4 Profit margin = net income / net sales Net income 55000 57000 Net sales 791000 890000 Profit margin 7.0% 6.4% -8% 5 Assets turnover ratio = Net sales / average total assets Net sales 791000 890000 Beginning total assets 637000 715000 Ending total assets 715000 884000 Average total assets 676000 799500 Assets turnover ratio 1.17 1.11 -5% 6 Return on assets = net income / total assets Net income 55000 57000 Total assets 715000 884000 Return on assets 7.7% 6.4% -16% 7 Earning per share = Net income /Average number of common shares Net income 55000 57000 Average number of common shares 20500 20500 Earning per share 2.68 2.78 4%

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