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    Problem 13-5 CCB Enterprises Basic Financial Ratios

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    The accounting staff of CCB Enterprises has completed the financial statements for the 2008 calendar year. The statement of income for the current year and the comparative statements of financial position for 2008 and 2007 follow.
    CCB Enterprises
    Statement of Income
    For the Year Ended December 31, 2008
    (Thousands omitted)
    Net sales $800,000
    Other 60,000
    Total Revenue 860,000
    Cost of goods sold $540,000
    Research and development 25,000
    Selling and administrative 155,000
    Interest 20,000
    Total expenses $740,000
    Income before income taxes $120,000
    Income taxes 48,000
    Net income $72,000
    CCB Enterprises
    Comparative Statements of Financial Position
    December 31, 2008 and 2007
    (Thousands omitted)
    2008 2007
    Current assets:
    Cash and short-term investments $26,000 $21,000
    Receivables, less allowance for doubtful accounts
    ($1,100 in 2008 and $1,400 in 2007) 48,000 50,000
    Inventories, at lower of FIFO cost or market 65,000 62,000
    Prepaid items and other current assets 5,000 3,000
    Total current assets $144,000 $136,000
    Other assets:
    Investments, at cost $106,000 $106,000
    Deposits 10,000 8,000
    Total other assets $116,000 $114,000
    Property, plant, and equipment:
    Land $12,000 $12,000
    Buildings and equipment, less accumulated depreciation
    ($126,000 in 2008 and $122,000 in 2007) 268,000 248,000
    Total property, plant, and equipment $280,000 $260,000
    Total assets $540,000 $510,000
    Liabilities and Owners' Equity
    Current Liabilities:
    Short-term loans $22,000 $24,000
    Accounts payable 72,000 71,000
    Salaries, wages, and other 26,000 27,000
    Total current liabilities $120,000 122,000
    Long-term debt 160,000 171,000
    Total liabilities $280,000 $293,000
    Owners' equity:
    Common stock, at par $44,000 $42,000
    Paid-in capital in excel of par 64,000 61,000
    Total paid-in capital $108,000 $103,000
    Retained earnings 152,000 114,000
    Total owners' equity $260,000 $217,000
    Total liabilities and owner's equity $540,000 $510,000
    1. Calculate the following financial ratios for 2008 for CCB Enterprises:
    a. Times interest earned
    b. Return on total assets
    c. Return on common stockholders'' equity
    d. Debt-equity ratio (at December 31, 2008)
    e. Current ratio (at December 31, 2008)
    f. Quick (acid test) ratio (at December 31, 2008)
    g. Accounts receivable turnover ratio (Assume that all sales are on credit.)
    h. Number of days' sales in receivables
    i. Inventory turnover ratio (Assume that all purchases are on credit.)
    j. Number of days' sales in inventory
    k. Number of days in cash operating cycle
    2. Prepare a few brief comments on the overall financial health of CCB Enterprises. For each comment, indicate any information that is not provided in the problem and that you would need to fully evaluate the company's financial health.

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    Solution Summary

    Your tutorial is attached. The numerator and denominator for each ratio is shown and this is now a template in Excel to use for other analysis you will perform.