The accounting staff of SST Enterprises has completed the financial statements for the 2010 calendar year. The statement of income for the current year and the comparative statements of financial position for 2010 and 2009 follow.
SST Enterprises
Statement of Income
Year Ended December 31, 2010
(thousands omitted)
Revenue:
Net sales .......... $600,000
Other .......... 45,000
Total revenue ......... $645,000
Expenses:
Cost of goods sold ...... $405,000
Research and development .. 18,000
Selling and administrative ... 120,000
Interest ......... 15,000
Total expenses ...... $558,000
Income before income taxes .. $ 87,000
Income taxes ........ 27,000
Net income ....... $ 60,000

Required
1. Calculate the following financial ratios for 2010 for SST Enterprises:
a. Times interest earned
b. Return on total assets
c. Return on common stockholders€™ equity
d. Debt-to-equity ratio (at December 31, 2010)
e. Current ratio (at December 31, 2010)
f. Quick (acid-test) ratio (at December 31, 2010)
g. Accounts receivable turnover ratio (Assume that all sales are on credit.)
h. Number of days€™ sales in receivables
i. Inventory turnover ratio (Assume that all purchases are on credit.)
j. Number of days€™ sales in inventory
k. Number of days in cash operating cycle
2. Prepare a few brief comments on the overall financial health of SST Enterprises. For each comment, indicate any information that is not provided in the problem that you would need to fully evaluate the company€™s financial health.
(CMAadapted)

Transcribed Image Text:

SST Enterprises Comparative Statements of Financial Position December 31, 2010 and 2009 thousands omitted) 2010 2009 Assets Current assets $ 27000 S 20,000 Cash and short-term investments Receivables, less allowance for doubtful accounts $1,100 in 2010 and $1.400 in 2009) Inventories, at lower of FIFO cost or market Prepaid items and other current assets 36,000 35,000 2,000 $100,000 37000 42,000 1,000 $100,000 Total current assets Property, plant, and equipment $ 9,000 S 9,000 186,000 $295,000 Land Buildings and equipment, less accumulated depreciation $74,000 in 2010 and $62,000 in 2009) Total property, plant, and equipment 191,000 $200,000 $300,000 Total assets Liabilities and Stockholders Equity Current liabilities: Short-term loans Accounts payable Salaries, wages, and other Total current liabilities 20,000 80,000 5,000 $105,000 15,000 $120,000 $ 15,000 68,000 7000 $90,000 40,000 $130,000 Long-term debt Total liabilities Stockholders' equity: $ 50,000 25,000 $ 75,000 105,000 $180,000 $300,000 $ 50,000 25,000 75,000 90,000 $165,000 $295,000 Common stock, at par Paid-in capital in excess of par Total paid-in capital Retained earnings Total stockholders equity Total liabilities and stockholders' equity