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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