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# Ratios

Selected year-end financial statements of Cadet Corporation follow. (All sales were on credit; selected balance sheet amounts at December 31, 2008, were inventory, \$56,900; total assets, \$219,400; common stock, \$85,000; and retained earnings, \$52,348.)

Income Statement
For Year Ended December 31, 2009
Sales \$456,600
Cost of goods sold

297,450

Gross profit 159,150
Operating expenses 99,400
Interest expense

3,900

Income before taxes 55,850
Income taxes

22,499

Net income

\$33,351

Balance Sheet
December 31, 2009
Assets Liabilities and Equity
Cash \$20,000 Accounts payable \$21,500
Short-term investments 8,200 Accrued wages payable 4,400
Accounts receivable, net 29,400 Income taxes payable 3,700
Notes receivable (trade)* 7,000 Long-term note payable, secured by mortgage on plant assets 67,400
Merchandise inventory 34,150 Common stock 85,000
Prepaid expenses 2,700 Retained earnings

66,750

Plant assets, net

147,300
Total liabilities and equity

\$248,750

Total assets

\$248,750

* These are short-term notes receivable arising from customer (trade) sales.

Required:

1. Current ratio to
2. Acid-test ratio to
3. Days' sales uncollected days
4. Inventory turnover times
5. Days' sales in inventory days
6. Debt-to-equity ratio to
7. Times interest earned times
8. Profit margin ratio %
9. Total asset turnover times
10. Return on total assets %
11. Return on common stockholders' equity %

#### Solution Preview

1. Current ratio = Current Assets/Current Liabilities
Current Assets = Total assets - plant asset = 248,750-147,300 = 101,450
Current Liabilities= 21,500+4,400+3,700 = 29,600
Current Ratio = 101,450/29,600 = 3.43

2. Acid-test ratio = (Cash +short term investment+ receivables)/current ...

#### Solution Summary

The solution explains the calculation of various ratios

\$2.19