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# Calculating Financial Ratios

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The financial statements of Lewis Company appear below:

LEWIS COMPANY
Comparative Balance Sheet
December 31,

Assets 2010 2009
Cash \$ 25,000 \$ 40,000
Marketable securities 20,000 60,000
Accounts receivable (net) 40,000 30,000
Inventory 150,000 170,000
Property, plant and equipment (net) 170,000 200,000
Total assets \$405,000 \$500,000

Liabilities and stockholders' equity
Accounts payable \$ 25,000 \$ 30,000
Short-term notes payable 40,000 90,000
Bonds payable 75,000 160,000
Common stock 175,000 145,000
Retained earnings 90,000 75,000
Total liabilities and stockholders' equity \$405,000 \$500,000

LEWIS COMPANY
Income Statement
For the Year Ended December 31, 2010

Net sales (all on credit) \$360,000
Cost of goods sold 184,000
Gross profit 176,000
Expenses
Interest expense \$21,000
Selling expenses 30,000
Total expenses 71,000
Income before income taxes 105,000
Income tax expense 30,000
Net income \$ 75,000

a. Cash dividends of \$50,000 were declared and paid on common stock in 2010.
b. Weighted-average number of shares of common stock outstanding during 2010 was 62,000 shares.
c. Market value of common stock on December 31, 2010, was \$15 per share.
d. Net cash provided by operating activities for 2010 was \$65,000.

Instructions

Using the financial statements and additional information, compute 5 of the following ratios for the Lewis Company for 2010. Show all computations.

1. Current ratio _________.
2. Return on common stockholders' equity _________.
3. Profit margin ratio _________.
4. Return on assets _________.
5. Cash debt coverage ratio _________.