CABOT CORPORATION Income Statement For Year Ended December 31, 2015 Sales Cost o

Question

CABOT CORPORATION Income Statement For Year Ended December 31, 2015 Sales Cost of goods sold $455,600 297,150 Gross profit Operating expenses Interest expense 158,450 98,700 4,800 Income before taxes Income taxes 54,950 22,136 Net income $32,814 CABOT CORPORATION Balance Sheet December 31, 2015 Assets Cash Short-term investments Accounts receivable, net Notes receivable (trade)* Merchandise inventory Prepaid expenses Plant assets, net Liabilities and Equity Accounts payable Accrued wages payable Income taxes payable Long-term note payable, secured $18,500 4,400 4,200 $ 20,000 9,000 33,400 7,000 40,150 2,700 153,300 by mortgage on plant assets Common stock 70,400 86,000 82,050 Retained earnings Total assets $265,550 Total liabilities and equity $265,550 These are short-term notes receivable arising from customer (trade) sales

Explanation / Answer

Solution:

Total Assets Turnover ratio = Net Sales / Average total assets

= $455,600 / $265,550 = 1.7156 times

Return on total assets = Earning before interest & taxes / Average total assets

= ($32,814 + $22,136 + 4,800) / $265,550 *100 = 22.50%

Return on common shareholder's equity = Net income after taxes and preference dividend / Average common shareholders equity * 100

= $32,814 / ($86000 + $82,050)*100 = 19.53%

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