1. Compute and interpret financial ratios that managers use to assess liquidity. 2. Compute and interpret...

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1. Compute and interpret financial ratios that managers use to assess liquidity. 2. Compute and interpret financial ratios that managers use for asset management purposes. 3. Compute and interpret financial ratios that managers use for debt management purposes. Selected Financial Ratios - Excel ? 4 REVIEW VIEW Sign In FILE HOME INSERT PAGE LAYOUT FORMULAS DATA Calibri 10 A A % Paste BIU- Alignment Number Conditional Format as Formatting Table Styles Cell Cells Editing Clipboard Font 2 Styles C45 X fx A B C ] E 1 Recent financial statements for Zimmer, Inc. are as follows: 2 3 Zimmer Company Comparative Balance Sheet 4 5 Assets This Year Last Year F Zimmer Company Income Statement This Year 6 Current assets: 7 Cash 8 Marketable securities 9 Accounts receivable, net 10 Inventory 11 Other current assets 12 Total current assets 13 Plant and equipment, net 14 Other assets 15 Total assets $ 360,000 $ 220,000 310,000 Sales (all on account) $4,980,000 80,000 Cost of goods sold 2,988,000 775,000 700,000 Gross margin 1.992.000 925,000 355,000 195.000 750,000 Selling and administrative expenses Operating expenses 985,500 2,635,000 2,035,000 Depreciation and amortization 410,500 1,975,000 1,800,000 General and administrative expenses 150,000 $ 75,000 4.685.000 $ 3,935.000 100,000 Total selling and administrative expenses 1.546,000 Net operating income 446,000 16 Liabilities and Stockholders' Equity 17 Current Liabilities: Interest expense 60,000 Net income before taxes 386,000 18 Accounts payable $ 19 Short-term bank loans 250,000 $ 750,000 225,000 Income taxes 135,100 600,000 Net income $ 250.900 20 Accrued payables 550,000 395,000 21 Other current liabilities 275.000 223.400 Additional information: 22 Total current liabilities 23 Bonds payable, 10% 1,825,000 575.000 24 Total liabilities 2,400,000 1,443,400 Dividend per share paid in current year 400.000 Market price of shares at year end 1,843,400 Par value of common stock per share $ 1.00 42.00 20.00 25 Stockholders' equity: 1,150,000 1,150,000 Number of shares outstanding 1,135,000 2,285,000 941,600 2,091,600 4.685.000 $ 3.935.000 26 Common stock 27 Retained earnings 28 Total stockholders' equity 29 Total liabilities and stockholders' equity $ 30 31 Required: 32 Compute the following ratios for the current year only: 33 Gross margin percentage 34 Current ratio (rounded to two decimal places) 35 Acid-test ratio (rounded to two decimal places) 36 Accounts receivable turnover (rounded to two decimal places) 37 Average collection period (rounded to the nearest whole day) 38 Inventory turnover ratio (rounded to two decimal places) 39 Average sales period (rounded to the nearest whole day) 40 Debt-to-equity ratio (rounded to two decimal places) 41 Times interest earned (rounded to two decimal places) Book value per share (rounded to two decimal places) 43 Earnings per share (rounded to two decimal places) 42 44 Dividend payout ratio (rounded to three decimal places) 45 Dividend yield ratio (rounded to three decimal places) 46 Price-earnings ratio (rounded to two decimal places) 47 48 44499 50 Sheet1 *** 1. Compute and interpret financial ratios that managers use to assess liquidity. 2. Compute and interpret financial ratios that managers use for asset management purposes. 3. Compute and interpret financial ratios that managers use for debt management purposes. Selected Financial Ratios - Excel ? 4 REVIEW VIEW Sign In FILE HOME INSERT PAGE LAYOUT FORMULAS DATA Calibri 10 A A % Paste BIU- Alignment Number Conditional Format as Formatting Table Styles Cell Cells Editing Clipboard Font 2 Styles C45 X fx A B C ] E 1 Recent financial statements for Zimmer, Inc. are as follows: 2 3 Zimmer Company Comparative Balance Sheet 4 5 Assets This Year Last Year F Zimmer Company Income Statement This Year 6 Current assets: 7 Cash 8 Marketable securities 9 Accounts receivable, net 10 Inventory 11 Other current assets 12 Total current assets 13 Plant and equipment, net 14 Other assets 15 Total assets $ 360,000 $ 220,000 310,000 Sales (all on account) $4,980,000 80,000 Cost of goods sold 2,988,000 775,000 700,000 Gross margin 1.992.000 925,000 355,000 195.000 750,000 Selling and administrative expenses Operating expenses 985,500 2,635,000 2,035,000 Depreciation and amortization 410,500 1,975,000 1,800,000 General and administrative expenses 150,000 $ 75,000 4.685.000 $ 3,935.000 100,000 Total selling and administrative expenses 1.546,000 Net operating income 446,000 16 Liabilities and Stockholders' Equity 17 Current Liabilities: Interest expense 60,000 Net income before taxes 386,000 18 Accounts payable $ 19 Short-term bank loans 250,000 $ 750,000 225,000 Income taxes 135,100 600,000 Net income $ 250.900 20 Accrued payables 550,000 395,000 21 Other current liabilities 275.000 223.400 Additional information: 22 Total current liabilities 23 Bonds payable, 10% 1,825,000 575.000 24 Total liabilities 2,400,000 1,443,400 Dividend per share paid in current year 400.000 Market price of shares at year end 1,843,400 Par value of common stock per share $ 1.00 42.00 20.00 25 Stockholders' equity: 1,150,000 1,150,000 Number of shares outstanding 1,135,000 2,285,000 941,600 2,091,600 4.685.000 $ 3.935.000 26 Common stock 27 Retained earnings 28 Total stockholders' equity 29 Total liabilities and stockholders' equity $ 30 31 Required: 32 Compute the following ratios for the current year only: 33 Gross margin percentage 34 Current ratio (rounded to two decimal places) 35 Acid-test ratio (rounded to two decimal places) 36 Accounts receivable turnover (rounded to two decimal places) 37 Average collection period (rounded to the nearest whole day) 38 Inventory turnover ratio (rounded to two decimal places) 39 Average sales period (rounded to the nearest whole day) 40 Debt-to-equity ratio (rounded to two decimal places) 41 Times interest earned (rounded to two decimal places) Book value per share (rounded to two decimal places) 43 Earnings per share (rounded to two decimal places) 42 44 Dividend payout ratio (rounded to three decimal places) 45 Dividend yield ratio (rounded to three decimal places) 46 Price-earnings ratio (rounded to two decimal places) 47 48 44499 50 Sheet1 ***