Exercise 13-9 Hendi Company has these comparative balance sheet data: HENDI COMP

Question

Exercise 13-9 Hendi Company has these comparative balance sheet data: HENDI COMPANY Balance Sheets December 31 2012 2011 Cash $ 15,855 $ 31,710 Receivables (net) 73,990 63,420 Inventories 63,420 52,850 Plant assets (net) 211,400 190,260 $364,665 $338,240 Accounts payable $ 52,850 $ 63,420 Mortgage payable (15%) 105,700 105,700 Common stock, $10 par 147,980 126,840 Retained earnings 58,135 42,280 $364,665 $338,240 Additional information for 2012: 1. Net income was $32,000. 2. Sales on account were $376,900. Sales returns and allowances amounted to $29,900. 3. Cost of goods sold was $228,700. 4. Net cash provided by operating activities was $58,300. 5. Capital expenditures were $26,800, and cash dividends were $17,300. Compute the following ratios at December 31, 2012. (Round all answers to 2 decimal places, e.g. 1.83.) (a) Current ratio :1 (b) Receivables turnover times (c) Average collection period days (d) Inventory turnover times (e) Days in inventory days (f) Cash debt coverage ratio times (g) Current cash debt coverage ratio times (h) Free cash flow

Explanation / Answer

A 2012 Current Ratio Current Assets-Current liabilities (15855+73990+63420)/52850 2.90 B Receivable Turnover Ratio Net credit sales/Average Accounts Receivable (376900-29900)/((73990+63420)/2) 5.05 c Average Collection period days No. of working days/Receivable Turnover Ratio If 360 days Taken 360/5.05 71.29 days If 365 days taken 365/5.05 72.28 days d Inventory Turnover ratio COGS/Average Inventory 228700/((63420+52850)/2) 3.93 e Days in Inventory No. of working days/Inventory Turnover Ratio If 360 days Taken 360/3.93 91.60 days If 365 days taken 365/3.93 92.88 days F cash debt coverage ratio times Net cash provided bu Operating Activities/Average total liabilities 58300/((52850+105700+63420+105700)/2) 0.36 G Current cash debt coverage ratio times Net cash provided bu Operating Activities/Average current liabilities 58300/((52850+63420)/2) 1.00 H Free Cash Flow Opearting Cash Flow-Capital expensditure 58300-26800 31500

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