Use the Following Information from the Current Year Financial Statements

question 20

Essay

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.)
$$\begin{array}{l}\text { Income statement data: }\\\begin{array} { | l | c | } \hline \text { Sales (all on credit) } & \$ 1,075,000 \\\hline \text { Cost of goods sold } & 575,000 \\\hline & \$ \\\text { Gross profit on sales } & 500,000 \\\hline \text { Operating expenses } & 305,000 \\\hline \text { Operating income } & \$ 195,000 \\\hline \text { Interest expense } & 20,400 \\\hline \text { Income before taxes } & \$ \\\hline \text { Income taxes } & 74,000 \\\hline \text { Net income } & \$ 174,600 \\\hline \text { Balance sheet data: } & 100,600 \\\hline \text { Cash } & \$ 38,400 \\\hline \text { Accounts receivable } & 120,000 \\\hline \text { Inventory } & 56,700 \\\hline \text { Prepaid Expenses } & 24,000 \\\hline \text { Total current assets } & \$ 239,100 \\\hline \text { Total plant assets } & 708,900 \\\hline \text { Total assets } & \$ 948,000 \\\hline \text { Accounts payable } & \$ 91,200 \\\hline \text { Interest payable } & 4,800 \\\hline \text { Long-term liabilities } & 204,000 \\\hline \text { Total liabilities } & \$ 300,000 \\\hline \text { Common stock, \$10 par } & 480,000 \\\hline \text { Retained earnings } & 168,000 \\\hline \text { Total liabilities and equity } & \$ 948,000 \\\hline\end{array}\end{array}$$

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Definitions:

Standard Deviation

An indicator of the degree of spread or scatter of a collection of numbers, showing the extent to which these numbers differ from their average value.

Error of Estimation

The error of estimation, often referred to as the margin of error, quantifies the uncertainty associated with estimating population parameters based on sample statistics.

Sample Size

The number of observations or data points collected in a study or experiment.

Population Standard Deviation

A measure of the dispersion of a set of data from its mean, considering the entire population.