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Ratio calculation

The comparative balance sheet of a company at October 31, 2009 for the years 2009 and 2008, and the income statements for the years ended October 31, 2008 and 2009, are presented on the following page.

Balance Sheet
October 31

Assets 2009 2008

Cash $ 34,324 $13,050
Accounts receivable 3,250 2,710
Inventory 7,897 7,450
Prepaid expenses 6,300 6,050
Equipment 96,500 75,500
Accumulated depreciation (25,200) (9,100)

Total assets $123,071 $95,660

Liabilities and Stockholders' Equity

Accounts payable $ 3,650 $ 2,450
Income taxes payable 10,251 11,200
Dividends payable (on common stock) 28,000 25,000
Salaries payable 2,250 1,280
Interest payable 188 0
Note payable-current portion 3,000 0
Note payable-long-term portion 4,500 0
Preferred stock, no par, $6 cumulative-
3,000 and 2,500 shares issued,
respectively 15,000 12,500
Common stock, $1 par-23,180
shares issued 23,180 23,180
Additional paid in capital-treasury stock 250 250
Retained earnings 32,802 19,800

Total liabilities and stockholders' equity $123,071 $95,660

Income Statement
Year Ended October 31

2009 2008
Sales $485,625 $462,500
Cost of goods sold 222,694 208,125
Gross profit 262,931 254,375

Operating expenses
Depreciation expense 17,850 9,100
Salaries and wages expense 147,979 146,350
Other operating expenses 43,186 42,925
Total operating expenses 209,015 198,375

Income from operations 53,916 56,000

Other expenses
Interest expense 413 0
Loss on sale of computer equipment 2,250 0
Total other expenses 2,663 0

Income before income tax 51,253 56,000
Income tax expense 10,251 11,200

Net income $ 41,002 $ 44,800

Instructions: Calculate the following ratios for 2008 and 2009.

2009
1. Current ratio
2. Debt to total assets
3. Gross profit rate
4. Profit margin
5. Return on assets (Total assets at November 1, 2007, were $33,180.)
6. Return on common stockholders' equity (Total common stockholders' equity at November 1, 2007, was $23,180.)
7. Payout ratio

2008
1. Current ratio
2. Debt to total assets
3. Gross profit rate
4. Profit margin
5. Return on assets (Total assets at November 1, 2007, were $33,180.)
6. Return on common stockholders' equity (Total common stockholders' equity at November 1, 2007, was $23,180.)
7. Payout ratio

Attachments

Solution Summary

The solution explains how to calculate the required ratios

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