Selected year-end financial statements of Cabot Corporation follow. (All sales w
ID: 2480114 • Letter: S
Question
Selected year-end financial statements of Cabot Corporation follow. (All sales were on credit; selected balance sheet amounts at December 31, 2014, were inventory, $54,900; total assets, $209,400; common stock, $87,000; and retained earnings, $31,704.)
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.)
Selected year-end financial statements of Cabot Corporation follow. (All sales were on credit; selected balance sheet amounts at December 31, 2014, were inventory, $54,900; total assets, $209,400; common stock, $87,000; and retained earnings, $31,704.)
Explanation / Answer
current ratio Current assets / curent liabilities 94650/23600 4.01 acid test ratio (current assets - inventory - prepaid expenses) / current liabilitites (94650-36150-2600)/23600 2.37 average collection period (Average net accounts receivable / Net sales on account) * 365 days (34200/451600)*365 27.64 Inventory turnover Cost of goods sold / average inventory 297050/((54900+36150)/2) 6.52 Days sales in inventory (average inventory / cost of goods sold) * 365 days (((54900+36150)/2)/297050)*365 55.94 debt to equity Total liabilties / total equity 94000/148950 0.63 times interest earned Earning before interest and tax / interest expense 55150/4500 12.26 Profit Margin ratio Net profit/ net sales 30246/451600 6.70% Total asset turnover Sales / Average total assets 451600 / ((209400+242950)/2) 2.00 Return on total assets Net profit / Average total assets 4500 / ((209400+242950)/2) 1.99% Return on common stockholders' equity Net profit/Average stock holders' equity 4500/((148950+118704)/2) 3.36% Current assets = 8000+9200+34200+4500+36150+2600 = $94650 Current Liabilities =15500+3600+4500 = $23600 Total equity on Dec 31' 2015 = 87000+61950= $148950 Total equity on dec 31, 2014 = 87000+31704 = $118704 Total liabilitites = 15500+3600+4500+70400 = $94000 Operating profit = 154550-99400 = $55150
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