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Calculating ratios for Taylor Tool Company

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P15-2 The comparative statement of Taylor Tool Company are presented below

Taylor Tool Company
Income Statement
For the Year Ended December 31
2006 2005
Net Sales $ 1,818,500 $1,750,500
Cost of Goods Sold $1,011,500 $996,000
Gross Profit $807,000 $754,500
Selling and administrative expense $506,000 $479,000
Income from operations $301,000 $275,500
Other expenses and losses
Interest expense $18,000 $14,000
Income before taxes 283,000 $261,500
Income tax $84,000 $77,000
Net income $199,000 $184,500

Taylor Tool Company
Balance Sheet
Assets 2006 2005
Current assets
Cash $60,100 $64,200
Short-term investments $69,000 $50,000
Accounts receivables(net) $107,800 $102,800
Inventory $133,000 $115,500
Total current assets $369,900 $332,500
Plant assets (net) $600,300 $520,300
Total Assets $970,200 $852,800
Liability ans stockholders' Equity
Current Liability
Accounts Payables $160,000 $145,400
Income Tax Payable $43,500 $42,000
Total Current Liability $203,500 $187,400
Bond Payable $200,000 $200,000
Total Liability $403,500 $387,400
Stockholders' equity
Common Stock ($5 par) $280,000 $300,000
Retained earnings $286,700 $165,400
Total Stockholders' equity $566,700 $465,400
Total Liabilities and stockholders' equity $970,200 $852,800

All sales were on account. The allowance for doubtful account was $3,200 on December 31, 2006, and $3,000 on
December 31, 2005.

Compute the following ratios for 2006. (Weighted average common shares in 2006 were 57,000.)
a) Earnings per share (f) Receivables turnover.
b) Return on common stockholder's equity (g) Inventory turnover.
c) Return on assets. (h) Times interest earned.
d) Current. (i) Asset turnover.
e) Acid-test (j) Debt to total asets.

I have already submitted this problem, but I am still not sure is what I did is correct. I would like to compare my answers.

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Please see the attached file

a) Earnings per share = Net Income/Weighted Average common shares) $3.49
b) Return on common stockholder's equity = Net Income/Average ...

Solution Summary

The solution explains how to calculate the various ratios given the comparative balance sheets using the example of Taylor Tool Company

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