Shown below are data taken from a recent annual report of Falcon Co. (Dollar amo

Question

Shown below are data taken from a recent annual report of Falcon Co. (Dollar amounts in millions) Beginning of year End of Year Balance sheet data: Current assets $1,034 $1,120 Total assets $1,532 $1,822 Current liabilities $379 $318 Total liabilities $546 $477 Total stockholders' equity $1,000 41, 217 Income statement data: Net sales $2,759 Gross profit $1, 264 Operating income $574 Net income $421 Based upon the above information, indicate the best answer in the space provided. The current ratio at year-end (rounded to the nearest tenth) is: 2.3 to 1. 6 to 1. 3.5 to 1. Some other answer. The amount of working capital at the beginning of the year (in millions) was: $785. $1,193. $479. Some other answer. The gross profit rate for the year (rounded to the nearest 1 percent) was: 46%. 54%. 69%. Some other answer. The return on average total assets during the year (rounded to the nearest percent) was: 24%. 34%. 79%. Some other answer. The return on average total stockholders' equity during the year (rounded to the nearest 1 percent) was: 50%. 41%. 38%. Some other answer.

Explanation / Answer

1.

C. 3.5 to 1

Working Note:

Current Ratio = Current Assets / Current Liabilities = 1120/318 = 3.52 or 3.5 approx.

2.

D. Some other answer

Working Note:

Working Capital = Current assets – Current liability = 1034 – 379 = 655 Million

3.

A. 46%

Working Note:

Gross profit rate = Gross profit / Net sales = 1264/2759 = 46% approx.

4.

D. Some other answer

Working Note:

Return on average total assets = Net income / Average total assets = 421/((1532+1822)/2)

Return on average total assets = 25.1%

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