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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
    31-Dec
    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.

    Instructions
    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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    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

    $2.19