Use the Following Information from the Current Year Financial Statements

question 95

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

---

Definitions:

Transmitter

A device that sends signals, such as radio waves, from one location to another, typically used in communication systems.

Double-Declining-Balance

An accelerated depreciation method that doubles the rate at which an asset's book value is reduced compared to straight-line depreciation.

Scrap Value

A projection of the sale price for an asset at the point where it ceases to have utility.

Truck

A large motor vehicle designed for transporting goods by road.