Use the attached financial statements to calculate the following ratio: Assets L
ID: 2742766 • Letter: U
Question
Use the attached financial statements to calculate the following ratio:
Assets Liabilities
Current Assets Current Liabilities
Cash 50 Accounts payable 42
Accounts receivable 22 Notes payable/short-term debt 7
Inventories 17
Total current assets 89 Total current liabilities 49
Long-Term Assets Long-Term Liabilities
Net property, plant,
and equipment 121 Long-term debt 128
Total long-term assets 121 Total long-term liabilities 128
Total Liabilities 177
Stockholders’ Equity 33
Total Assets 210 Total Liabilities and 210
Stockholders’ Equity
Income Statement
Total sales 312
Cost of sales -210
Gross Profit 102
Selling, general,
and administrative expenses -34
Research and development -10
Depreciation and amortization -5
Operating Income 53
Other income -
Earnings before interest
and taxes (EBIT) 53
Interest income (expense) -20
Pretax income 33
Taxes -8
Net Income 25
1. Current ratio, quick ratio
2. Debt-to-equity ratio (Total debt vs. Total equity), equity multiplier, and times interest earned
3. Total asset turnover, inventory turnover, receivables turnover
4. Return on equity, return on assets, profit margin
5. DuPont Identity
Explanation / Answer
1. Current Ratio = Current Assets / Current Liability = 89 /49 =1.81
Quick Ratio = (Current Assets- Inventories) /Current Liability =( 89-17)/49=1.469
2.Debt to equity ratio = Total liability / Shareholders equity = 210 /33 = 6.3636
Equuity Multiplier = Total Assets/Total Equity = 210/33=6.3636
Times Interest Earned = EBIT / interest =53/20 =2.65
3.Total Asset Turnover Ratio = Sales/ Assets = 312 /210 =1.4827
Inventory Turn Over Ratio = Sales /Inventory =312/17=18.35
For inventory turnover ratio you can also use Cost of goods sold /Inventory =210/17 =12.352
Receivables Turnover Ratio=Accounts Receivables/Total Sales = 22 /312 =0.07051
4.Return On Equity = Net Income After Tax(NIAT)/Equity(E) =25/33 =0.7575
Return on Asset = NIAT / Asset(A) =25/210 = 0.1190
profit margin(m) =NIAT/Sales = 25/312 =0.08012
5. Du pont Identity
Return On Asset = NIAT/Sales * Sales/Assets
=m * ATO = 0.08012 * 1.4857 = 0.1190
Return On Equity =NIAT /sales * Sales /Assets * Assets/Equity
=m * ATO * EQuity Mutiplier
=0.08012 * 1.4857 * 6.363 = 0.7575
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