Financial information for Sigma Company is presented below. Calculate the following ratios for Year 2:(a) Inventory turnover.(b) Accounts receivable turnover.(c) Return on total assets.(d) Times interest earned.(e) Total asset turnover.?Year 2Year 1Assets:??Cash$ 18,000$ 22,000Marketable securities25,0000Accounts receivable38,00042,000Inventory61,00052,000Prepaid insurance6,0009,000Long-term investments49,00020,000Plant assets, net218,000 225,000Total assets$415,000$370,000???Net income after interest expense and taxes$ 62,250?Sales (all on credit)305,000?Cost of goods sold123,000?Interest expense15,600?Income tax expense27,000?
What will be an ideal response?
(a) Inventory turnover:
$123,000/[($61,000 + $52,000)/2] = 2.2 times
(b) Accounts receivable turnover:
$305,000/[($38,000 + $42,000)/2] = 7.6 times
(c) Return on total assets:
$62,250/[($415,000 + $370,000)/2] = 16%
(d.) Times interest earned:
($62,250 + $15,600 + $27,000)/$15,600 = 6.7 times
(e.) Total asset turnover:
$305,000/[($415,000 + $370,000)/2] = 0.78 times
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