Exercise 9-13 The condensed financial statements of Sunland Company for the y SU

Question

Exercise 9-13 The condensed financial statements of Sunland Company for the y SUNLAND COMPANY Balance Sheets December 31 (in thousands) 2017 2016 Current assets Cash and cash equivalents Accounts receivable (net) Inventory Prepaid expenses $330 $360 500 530 160 1,630 1,550 570 600 130 Total current assets Property, plant, and equipment (net) Investments Intangibles and other assets 410 380 110 510 $2,680 $2,550 $920 $890 520 1,140 1,140 $%2,680 $2,550 110 530 Total assets Current liabilities Long-term liabilities Stockholders' equity common 620 Total liabilities and stockholders equity SUNLAND COMPANY Income Statements eyPolicy 2000-2018John.wley-BSons,inG All Rights Reserved. A Division o 1

Explanation / Answer

A) Current Ratio      =   Current assets/ current liabilities

2017 )

1630 / 920   = 1.771

2016 )

1550 / 890    = 1.741

B) Inventory turnover = sales / average inventory (adding the beginning and ending inventory dividedby two)

2017)

Sales = 3940

Average inventory = 600+450/2 = 525

Inventory turnover = 3940/ 525 = 7. 504 times

2016 )  

Sales = 3600

Average inventory = 530+600/2 = 565

Inventory turnover = 3600/ 565 = 6.371 times

C)  Profit margin = Net Income /Net sales

2017)

3940/276 = 14.27 %

2016)

  3600/156 = 23.07 %

D) Return on assets = Net Profit ÷ Average Total Assets (adding the beginning and ending total assets divided  by two)

2017)

276/ 5030 (2350+2680) = 0.0548%

2016)

156/ 5230 (2550+2680) =0.0298%

E) Return on common stockholder's equity ratio= Net Income / Average common stockholders' equity

2017)

276 / 2070 (1140+930) =7.5%

2016)

156 / 1140 ( 1140+1140) = 7.3%

F) Debt to assets ratio = Total debt / Total assets

2017)

620 / 2680 = 0.23%

2016)

520 / 2550 = 0.20%

G) Time interest earned = Earnings before Interest and tax / Interest expense

2017)

460 / 10 = 46 times

2016)

260 / 20 = 13 times

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