Check my 6 Problem 13-4A (Algo) Calculating financial statement ratios LO P3 12 points Selected current year-end financial statements of Cabot Corporation follow. (All sales were on credit; selected balance sheet amounts at December 31 of the prior year were inventory, $49,900; total assets, $219,400; common stock, $85,000; and retained earnings, $38,369.) eBook References Assets Cash Short-term investments Accounts receivable, net Merchandise inventory Prepaid expenses Plant assets, net Total assets CABOT CORPORATION Balance Sheet December 31 of current year Liabilities and Equity $ 18,000 Accounts payable 8,600 Accrued wages payable 33,200 Income taxes payable 38,150 Long-term note payable, secured by mortgage on plant assets 2,600 Common stock 148,300 Retained earnings $ 248,850 Total liabilities and equity $ 15,500 3,200 4,000 71,400 85,000 69,750 $ 248,850 CABOT CORPORATION Income Statement For Current Year Ended December 31 Sales $ 453,600 Cost of goods sold 297,650 Gross profit 155,950 Operating expenses 98,600 Interest expense 4,800 Income before taxes 52,550 Income tax expense 21,169 Net income $ 31,381 Required: Compute the following: (1) current ratio, (2) acid-test ratio, (3) days' sales uncollected, (4) inventory turnover, (5) days' sales in inventory, (6) debt-to-equity ratio, (7) times interest earned, (8) profit margin ratio, (9) total asset turnover, (10) return on total assets, and (11) return on equity. (Do not round intermediate calculations.) Req 1 and 2 Req 3 Req 4 Reg 5 Reg 6 Reg 7 Req 8 Req 9 Req 10 Req 11 Compute the current ratio and acid-test ratio. (1) Current Ratio Numerator: 1 Denominator: Current Ratio / Current ratio / = to 1 (2) Acid-Test Ratio Numerator: 1 Denominator: = Acid-Test Ratio Acid-Test Ratio to 1 = Req 1 and 2 Reg 3 Reg 4 Reg 5 Req 6 Req 7 Req 8 Reg 9 Req 10 Req 11 Compute the days' sales uncollected. (3) Days' Sales Uncollected 1 Denominator: Numerator: x Days = Days Sales Uncollected 1 = Days sales uncollected days Req 1 and 2 Req3 Reg 4 Reg 5 Req 6 Reg 7 Req 8 Reg 9 Req 10 Reg 11 Compute the inventory turnover. (4) Inventory Turnover Denominator: Numerator: 1 / 1 Inventory Turnover Inventory turnover times Req 1 and 2 Reg 3 Reg 4 Reg 5 Reg 6 Reg 7 Reg 8 Reg 9 Reg 10 Req 11 Compute the days' sales in inventory. (5) Days' Sales in Inventory. Denominator: Numerator: x Days = = Days' Sales in Inventory Days' sales in inventory days / = Req 1 and 2 Req3 Reg 4 Reg 5 Reg 6 Req 7 Req 8 Req 9 Req 10 Req 11 Compute the debt-to-equity ratio. (6) Debt-to-Equity Ratio Denominator: Numerator: II Debt-to-Equity Ratio Debt-to-equity ratio to 1 / il Req 1 and 2 Req 3 Reg 4 Req 5 Req 6 Req 7 Reg 8 Reg 9 Req 10 Req 11 Compute the times interest earned. (7) Times Interest Earned Numerator: Denominator: Times Interest Earned / Times interest earned times + / = Req 1 and 2 Req3 Reg 4 Reg 5 Reg 6 Reg 7 Req 8 Req 9 Req 10 Reg 11 Compute the profit margin ratio. (8) Profit Margin Ratio Denominator: Numerator: = / = Profit margin ratio Profit margin ratio % 1 = Req 1 and 2 Req3 Req 4 Req 5 Req 6 Req 7 Req 8 Reg 9 Reg 10 Req 11 Compute the total asset turnover. (9) Total Asset Turnover Denominator: Numerator: = Total Asset Turnover Total asset turnover / = 1 = times Req 1 and 2 Reg 3 Req 4 Reg 5 Reg 6 Reg 7 Reg 8 Req 9 Req 10 Reg 11 Compute the return on total assets. (10) Return on Total Assets Denominator: Numerator: 1 Return on Total Assets 1 = Return on total assets = % Req 1 and 2 Reg 3 Req 4 Req 5 Reg 6 Req 7 Req 8 Req9 Reg 10 Reg 11 Compute the return on equity. (11) Return on Equity Denominator Numerator: II Return On Equity Return on equity 1 II 1 %