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Ratio calculation and comparative statements

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The comparative statements of Villa Tool Company are presented below.

VILLA TOOL COMPANY
Income Statement
For the Year Ended December 31
2009 2008
Net sales $1,818,500 $1,750,500
Cost of goods sold 1,011,500 996,000
Gross profit 807,000 754,500
Selling and administrative expense 516,000 479,000
Income from operations 291,000 275,500
Other expenses and losses Interest expense 18,000 14,000
Income before income taxes 273,000 261,500
Income tax expense 81,000 77,000
Net income $ 192,000 $ 184,500

VILLA TOOL COMPANY
Balance Sheets
December 31
Assets 2009 2008
Current assets
Cash $ 60,100 $ 64,200
Short-term investments 69,000 50,000
Accounts receivable (net) 117,800 102,800
Inventory 123,000 115,500
Total current assets 369,900 332,500
Plant assets (net) 600,300 520,300
Total assets $970,200 $852,800
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable $160,000 $145,400
Income taxes payable 43,500 42,000
Total current liabilities 203,500 187,400
Bonds payable 200,000 200,000
Total liabilities 403,500 387,400
Stockholders' equity
Common stock ($5 par) 280,000 300,000
Retained earnings 286,700 165,400
Total stockholders' equity 566,700 465,400
Total liabilities and stockholders' equity $970,200 $852,800

All sales were on account. The allowance for doubtful accounts was $3,200 on December 31, 2009, and $3,000 on December 31, 2008.
Hint:
Compute ratios from balance sheet and income statement.

Instructions
Compute the following ratios for 2009. (Weighted average common shares in 2009 were 57,000.)
(a) Earnings per share.

(b) Return on common stockholders' equity.

(c) Return on assets.

(d) Current.

(e) Acid-test.

(f) Receivables turnover.

(g) Inventory turnover.

(h) Times interest earned.

(i) Asset turnover.

(j) Debt to total assets.

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Solution Preview

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Earnings per share = Net Income/Number of shares = 192,000/57,000=$3.37

Return on equity = Net Income/Average Equity = 192,000/(566,700+465,400)/2) = 37.2%

Return on assets = Net ...

Solution Summary

The solution explains the calculation of some ratios

$2.19
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The Comparative statements of Jack Frost Company are presented here.

Jack Frost Company
Income Statement
For the year ended December 31

2007 2008

Net Sales $1,890,540 1,750,500
Cost of Goods sold 1,058,540 996,000

Gross Profit 832,000 754,500
Selling & admin. Exp. 506,000 275,500

Income from operations 326,000 275,500
Other expenses and losses
Interest expense 25,000 19,000

Income before income taxes 301,000 256,500
Income tax expense 86,000 77,000

Net Income 215,000 179,500

Jack Frost
Balance Sheet
December 31

Assets 2007 2008

Current assets
Cash 60,100 64,200
Short term Inv 74,000 50,000
Accounts Receivable 107,800 102,800
Inventory 133,000 115,500
Total Current Assets 374,900 332,500

Liabilities and Stockholders Equity
Current Liabilities
Accounts payable 160,000 145,400
Income tax payable 43,500 42,000
Total current Liabilities 203,500 187,400
Bonds payable 210,000 200,000
Total Liabilities 413,500 387,400
Stockholders Equity
Common Stock ($5 per share) 290,000 300,000
Retained earnings 286,000 165,400
Total Stockholders equity 576,000 465,400

Total Liabilities and 990,200 852,000
Stockholders equity

All sales were on account. Net cash provided by operating activities for 2007 was $240,000. Capital expenditures were $120,000 and cash dividends were $80,000.
Complete the following ratios for 2007:

A) Earnings per share H) Days in Inventory
B) Return on common stockholders equity I) Times interest earned
C) Return on assets J) Assets turnover
D) Current ratio K) Debt to total assets
E) Receivable turnover L) Current cash debt coverage
F) Average collection period M) Cash debt coverage
G) Inventory turnover N) Free cash flow

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