The following financial statements apply to Robin Company. Calculate the followi

Question

The following financial statements apply to Robin Company.

Calculate the following ratios for 2014 and 2015. When data limitations prohibit computing averages, use year-end balances in your calculations.

Net margin. (Round your answers to 2 decimal places. (i.e., .2345 should be entered as 23.45).)

Return on investment. (Since 2013 numbers are not presented do not use averages when calculating the ratios for 2014. Instead, use the number presented on the 2014 balance sheet. Round your answers to 2 decimal places. (i.e., .2345 should be entered as 23.45).)

Return on equity. (Since 2013 numbers are not presented do not use averages when calculating the ratios for 2014. Instead, use the number presented on the 2014 balance sheet. Round your answers to 2 decimal places. (i.e., .2345 should be entered as 23.45).)

Earnings per share. (Round your answers to 2 decimal places.)

Price-earnings ratio (market prices at the end of 2014 and 2015 were $6.06 and $4.79, respectively).(Round intermediate calculations and final answers to 2 decimal places.)

Book value per share of common stock. (Round your answers to 2 decimal places.)

Times interest earned. (Exclude extraordinary income in the calculation as they cannot be expected to recur and, therefore, will not be available to satisfy future interest payments. Round your answers to 2 decimal places.)

Working capital.

Current ratio. (Round your answers to 2 decimal places.)

Accounts receivable turnover. (Since 2013 numbers are not presented do not use averages when calculating the ratios for 2014. Instead, use the number presented on the 2014 balance sheet. Round your answers to 2 decimal places.)

Inventory turnover. (Since 2013 numbers are not presented do not use averages when calculating the ratios for 2014. Instead, use the number presented on the 2014 balance sheet. Round your answers to 2 decimal places.)

Debt to equity ratio. (Round your answers to 2 decimal places.)

2015 2014   Revenues        Net sales $ 211,500 $ 176,300        Other revenues 8,900 6,300   Total revenues 220,400 182,600   Expenses        Cost of goods sold 125,000 102,200        Selling expenses 19,600 17,600        General and administrative expenses 10,100 9,100        Interest expense 2,600 2,600        Income tax expense 19,200 17,000   Total expenses 176,500 148,500   Earnings from continuing operations
    before extraordinary items 43,900 34,100   Extraordinary gain (net of $2,600 tax) 3,800 0   Net income $ 47,700 $ 34,100   Assets   Current assets        Cash $ 5,600 $ 7,500        Marketable securities 1,000 1,000        Accounts receivable 36,300 30,100        Inventories 101,900 94,300        Prepaid expenses 4,600 3,600           Total current assets 149,400 136,500   Plant and equipment (net) 105,100 105,100   Intangibles 20,600 0   Total assets $ 275,100 $ 241,600   Liabilities and Stockholders’ Equity   Liabilities        Current liabilities        Accounts payable $ 39,700 $ 54,700        Other 15,200 15,600           Total current liabilities 54,900 70,300        Bonds payable 65,300 66,300        Total liabilities 120,200 136,600   Stockholders’ equity        Common stock (41,000 shares) 114,700 114,700        Retained earnings 40,200 (9,700 )           Total stockholders’ equity 154,900 105,000   Total liabilities and stockholders’ equity $ 275,100 $ 241,600

Explanation / Answer

a) Net Margin    = (Net Income/Revenue)*100 (extraordinary gain is excluded)

   for 2015 =(43900/220400)*100 = 19.92%

   for 2014 =(34100/182600) *100= 18.67%

b) Return on Investment = EBIT/Average capital employed

2015=65700/[(395300+378200)/2] = 16.98%

2014=53700/378200=14.20%

c) Return on Equity = Net income to equity shareholders/Equity (extra ordinary gain has been excluded)

   2015 = 43900/129950 = 0.3378 = 33.78%

   2014 = 34100/105000 = 0.3248 = 32.48%

d) Earnings per share: Net income to equity share holders/no of shares outstanding (extra ordinary gain excluded)

   2015 = 43900/41000 = $ 1.07

   2014 = 34100/41000 = $ 0.83

e) Price Earning Ratio = Market price of share/EPS

   2015 = 4.79/1.07 = 4.48

   2014 = 6.06/.83 = 7.30

f) Book Value per share = Net worth/No of shares

   2015 = 275100/41000 = $ 6.71

   2014 = 241600/41000 = $ 5.89

g) Times interest earned = EBIT/Interest Expense

    2015 = 65700/2600 = 25.27

    2014 = 53700/2600 = 20.65

h) Working capital = Current assets - current liabilities

2015 = 149400-54900= $94500

2014 = 136500-70300= $66200

i) Current Ratio = current assets/current liabilities

2015 = 149400/54900=2.72

2014=136500/70300=1.94

j) Acid test ratio = Cuurent assets-inventory-prepaid exp/current liabilities

2015=149400-101900-4600/54900=0.78

2014=136500-94300-3600/70300=0.55

k) Accounts Receivable Turnover = Net Sales/Average Debtors

2015=211500/[(36300+30100)/2] = 6.37

2014=176300/30100= 5.86

l) Inventory turnover = Cost of goods sold/average inventory

2015=125000/[(101900+94300)/2] = 0.13

2014= 102200/94300=1.08

m) Debt to Equity ratio = long term liabilities/Equity

2015=65300/154900=0.42

2014=66300/105000=0.63

n) Debt to Assets ratio = long term debt/Total tangible Assets

2015=65300/254500=26%

2014=66300/105100=63%

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