Use the following information from the current year financial statements of a company to calculate the ratios below:(a) Current ratio.(b) Accounts receivable turnover. (Assume the prior year's accounts receivable balance was $100,000.)(c) Days' sales uncollected.(d) Inventory turnover. (Assume the prior year's inventory was $50,200.)(e) Times interest earned ratio.(f) Return on common stockholders' equity. (Assume the prior year's common stock balance was $480,000 and the retained earnings balance was $128,000.)(g) Earnings per share (assuming the corporation has a simple capital structure, with only common stock outstanding).(h) Price earnings ratio. (Assume the company's stock is selling for $26 per share.)(i) Divided yield ratio. (Assume that the company paid $1.25 per share in cash
dividends.)Income statement data:?Sales (all on credit) $1,075,000Cost of goods sold575,000Gross profit on sales $ 500,000Operating expenses305,000Operating income$ 195,000Interest expense20,400Income before taxes$ 174,600Income taxes74,000Net income$ 100,600Balance sheet data:?Cash$ 38,400Accounts receivable120,000Inventory56,700Prepaid Expenses24,000Total current assets$239,100Total plant assets708,900Total assets$948,000Accounts payable$ 91,200Interest payable4,800Long-term liabilities204,000Total liabilities$300,000Common stock, $10 par480,000Retained earnings168,000Total liabilities and equity$948,000
What will be an ideal response?
(a)
| Cash | $ 38,400 |
| Accounts receivable | 120,000 |
| Inventory | 56,700 |
| Prepaid expenses | 24,000 |
| Total current assets | $239,100 ? |
| Accounts payable | $91,200 |
| Interest payable | 4,800 |
| Total current liabilities | $96,000 |
Current ratio = $239,100/$96,000 = 2.5 to 1
(b) Accounts receivable turnover =
$1,075,000/[$120,000 + $100,000)/2] = 9.8 times
(c) Days' sales uncollected = ($120,000/$1,075,000) * 365 = 40.7 days
(d) Inventory turnover = $575,000/[($56,700 + $50,200)/2] = 10.8 times
(e) Times interest earned = $195,000/$20,400 = 9.6 times
(f)
| ? | Beginning | Ending |
| Common stock | $480,000 | $480,000 |
| Retained earnings | 128,000 | 168,000 |
| Total equity | $608,000 | $648,000 |
Return on common stockholders' equity =
$100,600/[($608,000 + $648,000)/2] = 16%
(g) Number of shares of common stock = $480,000/$10 par = 48,000 shares
Earnings per share = $100,600/48,000 shares = $2.10
(h) Price earnings ratio = $26/$2.10 = 12.4
(i) Dividend yield ratio = $1.25/$26 = 4.8%
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