Required: Assuming that all sales were on account, calculate the following 1. Re
ID: 2482863 • Letter: R
Question
Required: Assuming that all sales were on account, calculate the following 1. Receivables turnover ratio. 2. Average collection period. 3. Inventory turnover ratio. 4. Average days in inveatory S. Current ratio. 6. Acid-test ratio. 7. Debt to equity ratio. 8. Times interest carned ratio. risk ratios for 2012 Data for The Athletic Attic are provided in P12- 4B. Earnings per share for the year ended December 31, 2012, are $1.26. The closing stock price on December 31 2012, is $21.42. Required Calculate the following profitability ratios for 2012 1. Gross profit ratio. 2. Return on assets. 3. Profit margin. 4. Asset turnover 5. Retum on equity 6. Price-carnings ratio. AN Swtes l A I BExplanation / Answer
1.A/
1./
RECEIVABLE TURNOVER RATIO
= NET CREDIT SALES / AVERAGE ACCOUNTS RECEIVABLE
= $8800000 / [($740000 + $760000) / 2]
= 11.73 TIMES
2./
AVERAGE COLLECTION PERIOD
= NUMBER OF WORKING DAYS / DEBTOR TURN OVER RATIO
= 365 / 11.73
= 31.12 DAYS
3./
INVENTORY TURNOVER RATIO
= COST OF GOODS SOLD / AVERAGE INVENTORY
= $5400000 / [($1355000 + $1025000) / 2]
= 4.54 TIMES
4./
AVERAGE DAYS IN INVENTORY
= (ENDINNING INVENTORY / COST OF GOODS SOLD) * 365
= ($1355000 / $5400000) * 365
= 91.59 DAYS
5./
CURRENT RATIO
= CURRENT ASSET / CURRENT LIBALITY
= $2349000 / $140000
= 16.78
6./
ACID TEST RAIO
= (CASH + ACCOUNTS RECEIVABLE) / CURRENT LIBALITES
= ($154000 + $740000) / $140000
= 6.39
7./
DEBT TO EQUITY RATIO
= TOTAL LIBALITES / TOTAL EQUITES
= $640000 / $2409000
= 0.27
8./
TIMES INTEREST EARNNED RATIO
= EBIT / INTEREST EXPENSES
= $1650000 / $40000
= 41.25 TIMES
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1.B/
1./
GROSS PROFIT RATIO
= GROSS PROFIT / SALES REVENUE
= $3400000 / $8800000
= 0.3863 OR 38.64%
2./
RETURN ON ASSET
= NET INCOME / AVERAGE TOTAL ASSET
= $1260000 / [($3049000 + $2964000) / 2]
= 0.4191 OR 41.91%
3./
PROFIT MARGIN
= NET PROFIT / SALES REVENUE
= $1260000 / $8800000
= 0.1432 OR 14.32%
4./
ASSET TURNOVER RATIO
= NET SALES / AVERAGE TOTAL ASSET
= $8800000 / [($3049000 + $2964000) / 2]
= 2.93
5./
RETURN ON EQUITY
= NET INCOME / AVERAGE TOTAL EQUITY
= $1260000 / [($2409000 + $2349000) / 2]
= 0.5296 OR 52.96%
6./
PRICE EARNNING RATIO
MARKET VALUE PER SHARE / EPS
= $21.42 / $1.26
= 17
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