Problem 13-4A Calculation of financial statement ratios LO P3
Selected year-end financial statements of Cabot Corporation follow. (All sales were on credit; selected balance sheet amounts at December 31, 2016, were inventory, $50,900; total assets, $219,400; common stock, $86,000; and retained earnings, $39,951.)
| CABOT CORPORATION Income Statement For Year Ended December 31, 2017 |
| Sales | $ | 450,600 | |
| Cost of goods sold | | 298,050 | |
| Gross profit | | 152,550 | |
| Operating expenses | | 98,900 | |
| Interest expense | | 4,000 | |
| Income before taxes | | 49,650 | |
| Income taxes | | 20,001 | |
| Net income | $ | 29,649 | |
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| CABOT CORPORATION Balance Sheet December 31, 2017 |
| Assets | | | | Liabilities and Equity | | | |
| Cash | $ | 12,000 | | Accounts payable | $ | 15,500 | |
| Short-term investments | | 8,800 | | Accrued wages payable | | 3,400 | |
| Accounts receivable, net | | 31,000 | | Income taxes payable | | 3,500 | |
| Notes receivable (trade)* | | 4,500 | | | | | |
| Merchandise inventory | | 34,150 | | Long-term note payable, secured by mortgage on plant assets | | 64,400 | |
| Prepaid expenses | | 2,650 | | Common stock | | 86,000 | |
| Plant assets, net | | 149,300 | | Retained earnings | | 69,600 | |
| Total assets | $ | 242,400 | | Total liabilities and equity | $ | 242,400 | |
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* These are short-term notes receivable arising from customer (trade) sales. 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 common stockholders' equity. (Do not round intermediate calculations.)
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| | | (1) | Current Ratio | | | Choose Numerator: | / | Choose Denominator: | = | Current Ratio | | | | / | | = | Current ratio | | 2017: | | / | | = | 0 | to 1 | | | | (2) | Acid-Test Ratio | | | | | | | | Choose Numerator: | / | Choose Denominator: | = | Acid-Test Ratio | | | | | / | | = | Acid-Test Ratio | | | 2017: | | / | | = | 0 | to 1 | |
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| | | (3) | Days' Sales Uncollected | | | Choose Numerator: | / | Choose Denominator: | x | Days | = | Days Sales Uncollected | | | | / | | x | | = | Days sales uncollected | | 2017: | | / | | x | | = | 0 | days | |
| 4) | Inventory Turnover | | | Choose Numerator: | / | Choose Denominator: | = | Inventory Turnover | | | | / | | = | Inventory turnover | | 2017: | | / | | = | 0 | times | |
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| | | (5) | Days Sales in Inventory | | | Choose Numerator: | / | Choose Denominator: | x | Days | = | Days Sales in Inventory | | | | / | | x | | = | Days sales in inventory | | 2017: | | / | | x | | = | 0 | days | |
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| | | (6) | Debt-to-Equity Ratio | | | Choose Numerator: | / | Choose Denominator: | = | Debt-to-Equity Ratio | | | | / | | = | Debt-to-equity ratio | | 2017: | | / | | = | 0 | to 1 | |
| (7) | Times Interest Earned | | | Choose Numerator: | / | Choose Denominator: | = | Times Interest Earned | | | | | + | | / | | = | Times interest earned | | | 2017: | | + | | / | | = | 0 | times | |
| (8) | Profit Margin Ratio | | | Choose Numerator: | / | Choose Denominator: | = | Profit margin ratio | | | | | / | | = | Profit margin ratio | | | 2017: | | / | | = | 0 | % | |
