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Financial Ratios

See attached file.

Computing Ratios

JACK FROST COMPANY
Income Statements
For the Years Ended December 31

The comparative statements of Jack Frost Company are presented here.

2007 2006
Net sales $1,890,540 $1,750.500
Costs of goods sold 1,058,540 996,000
Gross profit 832,000 754,500
Selling and administrative expenses 506,000 479,000
Income from operations 326,000 275,500
Other expenses and losses
Interest expense 25,000 19,000
Income before income taxes 301,000 265,500
Income tax expense 86,000 77,000
Net income $215,000 $179,500

JACK FROST COMPANY
Balance Sheet
December 31

Assets 2007 2006
Current assets
Cash $60,100 $64,200
Short-term investments 74,000 50,000
Accounts receivable 107,800 102,800
Inventory 133,000 115,500
Total current assets 374,900 332,500
Plant assets (net) 615,300 520,300
Total assets $990,200 $852,800

Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable 160,000 145,400
Income taxes payable 43,500 42,000
Total current liabilities 203,500 187,400
Bonds payable 210,000 200,000
Total liabilities 413,500 387,400
Stockholders' equity
Common stock ($5 par) 290,000 300,000
Retained earnings 286,700 165,400
Total stockholders' equity 576,700 465,400
Total liabilities and stockholders' equity 990,200 852,800

All sales were on account. Net cash provided by operating activities for 2007 was $240,000. Capital expenditures were $120,000, and cash dividends were $80,000.

Compute the following ratios for 2007.
1. Earnings per share.
2. Return on common stockholders' equity.
3. Return on assets.
4. Current ratio.
5. Receivables turnover.
6. Average collection period.
7. Inventory turnover.
8. Days in inventory.
9. Times interest earned.
10. Asset turnover.
11. Debt to total assets.
12. Current cash debt coverage.
13. Cash debt coverage.
14. Free cash flow.

Please use the following answer sheet to submit your work. You should show your work outside the answer key.
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Solution Preview

Compute the following ratios for 2007.

1. Earnings per share.
EPS = (Net Income - Preferred dividend)/Number of shares outstanding
Number of shares outstanding = Common Stock /Par Value = 290,000/5 =58,000
EPS = 215,000/58,000 = $3.71

2. Return on common stockholders' equity.
ROE = Net Income/Average stockholders equity
= 215,000/((576,700+465,400)/2) = 41.26%

3. Return on assets.
ROA = Net Income/Average Total Assets
= 215,000/((990,200+852,800)/2) = ...

Solution Summary

The solution explains the calculation of various financial ratios

$2.19