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Problem 9-24 Ratio analysis LO 9-2, 9-3, 9-4, 9-5

Financial statements for Revnik Company follow.

REVNIK COMPANY Balance Sheets As of December 31
	2015			2014
Assets
Current assets
Cash	$	19,000		$	15,000
Marketable securities		20,600			6,600
Accounts receivable (net)		47,000			39,000
Inventories		132,000			140,000
Prepaid items		26,000			11,000
Total current assets		244,600			211,600
Investments		27,000			20,000
Plant (net)		285,000			270,000
Land		32,000			27,000
Total assets	$	588,600		$	528,600
Liabilities and Stockholders Equity
Liabilities
Current liabilities
Notes payable	$	23,000		$	12,300
Accounts payable		168,800			155,000
Salaries payable		21,000			15,000
Total current liabilities		212,800			182,300
Noncurrent liabilities
Bonds payable		100,000			100,000
Other		30,000			25,000
Total noncurrent liabilities		130,000			125,000
Total liabilities		342,800			307,300
Stockholders equity
Preferred stock, (par value $10, 4% cumulative, non-participating; 6,000 shares authorized and issued)		60,000			60,000
Common stock (No par; 50,000 shares authorized; 10,000 shares issued)		60,000			60,000
Retained earnings		125,800			101,300
Total stockholders equity		245,800			221,300
Total liabilities and stockholders equity	$	588,600		$	528,600

REVNIK COMPANY Statements of Income and Retained Earnings For the Years Ended December 31
	2015			2014
Revenues
Sales (net)	$	290,000		$	270,000
Other revenues		9,200			6,200
Total revenues		299,200			276,200
Expenses
Cost of goods sold		145,000			121,000
Selling, general, and administrative		61,000			56,000
Interest expense		9,800			9,000
Income tax expense		53,000			52,000
Total expenses		268,800			238,000
Net earnings (net income)		30,400			38,200
Retained earnings, January 1		101,300			69,000
Less: Preferred stock dividends		2,400			2,400
Common stock dividends		3,500			3,500
Retained earnings, December 31	$	125,800		$	101,300

Required

Calculate the following ratios for 2015 and 2014. When data limitations prohibit computing averages, use year-end balances in your calculations.

a.	Working capital.

b.	Current ratio. (Round your answers to 2 decimal places.)

c.	Quick ratio. (Round your answers to 2 decimal places.)

d.	Receivables turnover (beginning receivables at January 1, 2014, were $40,000). (Round your answers to 2 decimal places.)

e.	Average days to collect accounts receivable. (Round intermediate calculations to 2 decimal places and final answers to the nearest whole number.)

f.	Inventory turnover (beginning inventory at January 1, 2014, was $146,000). (Round your answers to 2 decimal places.)

g.	Number of days to sell inventory.(Round intermediate calculations to 2 decimal places and final answers to the nearest whole number.)

h.	Debt to assets ratio. (Round your answers to 2 decimal places. (i.e., .2345 should be entered as 23.45.))

i.	Debt to equity ratio. (Round your answers to 2 decimal places.)

j.	Number of times interest was earned. (Round your answers to 2 decimal places.)

k.	Plant assets to long-term debt. (Round your answers to 2 decimal places.)

l.	Net margin. (Round your answers to 2 decimal places. (i.e., .2345 should be entered as 23.45.))

m.	Turnover of assets. (Use the total assets of 2014 as the average total assets to compute the 2014 figure.)(Round your answers to 2 decimal places.)

n.	Return on investment. (Use the total assets of 2014 as the average total assets to compute the 2014 figure.)(Round your answers to 2 decimal places. (i.e., .2345 should be entered as 23.45.))

o.	Return on equity. (Use the total stockholders' equity of 2014 as the average total stockholders' equity to compute the 2014 figure.) (Round your answers to 2 decimal places. (i.e., .2345 should be entered as 23.45.))

p.	Earnings per share. (Round your answers to 2 decimal places.)

q.	Book value per share of common stock. (Round your answers to 2 decimal places.)

r.	Price-earnings ratio (market price per share: 2014, $12.05; 2015, $13.10). (Round intermediate calculations to 2 decimal places and final answers to 2 decimal places.)

s.	Dividend yield on common stock.(Round your answers to 2 decimal place. (i.e., .2345 should be entered as 23.45.))

References

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161 answers

Sl	Particulars	Formula	2015	2014
a	Working capital.	Current Assets-Current Liabilities	31,800	29,300
b	Current ratio	Current Assets/Current Liabilities	1.15	1.16
c	Quick ratio	Current Assets-inventory/Current Liabilities	0.53	0.39
d	Receivables turnover	Sales/ Average Accounts Receivable	1.7	1.7
e	Average days to collect accounts receivable	360/Receivables turnover	214	211
f	Inventory turnover	Cost of Goods Sold/Inventory	0.27	0.21
g	Number of days to sell inventory	360/Inventory turnover	1351	1702
h	Debt to assets ratio	Long term debt /total aasets	0.22	0.24
i	Debt to equity ratio	Long term debt /shareholder's fund	0.53	0.56
j	Number of times interest was earned.	Profit before interest and tax/interest	1.8	1.9
k	Plant assets to long-term deb	Plant assets /long-term deb	2.19	2.16
l	Net margin.	net margin/sales	0.10	0.14
m	Turnover of assets	Sales/Total Assets	0.49	0.51
n	Return on equity.	Net Profit after Tax/Net Worth	0.12	0.17
o	Earnings per share	Net Profit after Taxo. of common stock outstanidng	2.80	3.58
q	Price-earnings ratio	Price / EPS	4.46	3.77

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