Purchase Solution

Calculation of financial statement ratios

Not what you're looking for?

Ask Custom Question

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.)

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

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

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 %


Purchase this Solution

Solution Summary

This solution involves the calculations of financial statement ratios.

Solution Preview

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 ...

Purchase this Solution

Free BrainMass Quizzes
Basics of corporate finance

These questions will test you on your knowledge of finance.

Organizational Leadership Quiz

This quiz prepares a person to do well when it comes to studying organizational leadership in their studies.

Learning Lean

This quiz will help you understand the basic concepts of Lean.


This quiz will test your understanding of the SWOT analysis, including terms, concepts, uses, advantages, and process.

Marketing Research and Forecasting

The following quiz will assess your ability to identify steps in the marketing research process. Understanding this information will provide fundamental knowledge related to marketing research.