Financial ratios and Kapalua Company
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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
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Solution Summary
The solution involves the calculations of numerators and denominators of financial ratios.
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Kapalua Company
Solution
Numerator Denominator Ratio
Rate of Return on Assets $54 $748 7.22%
Profit margin ratio (before interest ...
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