Calculation of financial statement ratios
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Calculation of financial statement ratios
Selected year-end financial statements of Cabot Corporation follow. (Note: All sales are on credit; selected balance sheet amounts at December 31, 2007, were inventory, $49,900; total assets, $169,400; common stock, $110,000; and retained earnings, $52,348.)
CABOT CORPORATION
Income Statement
For Year Ended December 31, 2008
Sales $ 455,600
Cost of goods sold 298,150
Gross profit 157,450
Operating expenses 98,500
Interest expense 4,100
Income before taxes 54,850
Income taxes 22,096
Net income $ 32,754
________________________________________
CABOT CORPORATION
Balance Sheet
December 31, 2008
Assets Liabilities and Equity
Cash $ 16,000 Accounts payable $ 24,500
Short-term investments 8,200 Accrued wages payable 3,400
Accounts receivable, net 33,000 Income taxes payable 3,000
Notes receivable (trade)* 6,000 Long-term note payable, secured by mortgage on plant assets 66,400
Merchandise inventory 36,150 Common stock 125,000
Prepaid expenses 2,450 Retained earnings 26,800
Plant assets, net 147,300 Total liabilities and equity $ 249,100
Total assets $ 249,100
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* These are short-term notes receivable arising from customer (trade) sales.
Required:
Compute the following (Do not round interim calculations. Round your answer to 1 decimal place. Omit the "%" sign, which is provided for you):
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 %
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Solution Summary
This solution involves the calculations of financial statement ratios.
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Current Ratio = = = 3.29
Acid test or Quick ratio = (current assets - inventories) / current liabilities = (101,800 - 36,150) / 30,900 = 2.12
Days' sales uncollected = 365 / Receivable Turnover
Because we need to know the receivable turnover in ...
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