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Financial ratios and Kapalua Company

Statement of Financial Position As of May 31
(in thousands)Assets Year 7 Year 6
Current assets
   Cash $45 $38
   Trading securities 30 20
   Accounts receivable (net) 68 48
   Inventories 90 80
   Prepaid expenses  22  30
      Total current assets $255 $216
   Investments, at equity 38 30
   Property, plant, and equipment (net) 375 400
   Intangible assets (net)  80  45
      Total assets $748 $691
Liabilities and shareholders' equity
Current liabilities
   Notes payable $35 $18
   Accounts payable 70 42
   Accrued expenses 5 4
   Income taxes payable   15  16
      Total current liabilities 125 80
   Long-term debt 35 35
   Deferred taxes    3    2
      Total liabilities $163 $117
Shareholders' equity
   Preferred stock, 6%, $100 par value, cumulative 150 150
   Common stock, $10 par value 225 195
   Additional paid-in capital-common stock 114 100
   Retained earnings   96  129
      Total shareholders' equity $585 $574
      Total liabilities and shareholders' equity $748 $691

Kapalua Company
Income Statement
For the year ended May 31
(in thousands)
Year 7 Year 6
Net sales $480 $460
Costs and expenses
Cost of goods sold 330 315
Selling, general, and administrative 52 51
Interest expense    8    9
Income before taxes $90 $85
Income taxes   36   34
Net income $54 $51

Requirements
Calculate the following ratios. Show the numerator and denominator.

1 Rate of Return on Assets
2 Profit margin ratio (before interest expense)
3 Total assets turnover ratio
4 Accounts Receivable turnover ratio
5 Inventory turnover ratio
6 Fixed Asset turnover ratio
7 Cost of goods sold/Sales
8 Selling Administrative Expense/Sales
9 Interest Expense/Sales
10 Income Tax Expense/Sales
11 Rate of Return on Common Equity
12 ROCE Profit margin ratio (after preferred dividends)
13 Total assets turnover ratio
14 Capital Structure Leverage ratio

Solution Preview

Kapalua Company

Solution

Numerator Denominator Ratio
Rate of Return on Assets $54 $748 7.22%

Profit margin ratio (before interest ...

Solution Summary

The solution involves the calculations of numerators and denominators of financial ratios.

$2.19