Because you own the common stock of Phantom Corporation, a paper manufacturer, y

Question

Because you own the common stock of Phantom Corporation, a paper manufacturer, you decide to analyze the firm’s performance for the most recent year. The following data are taken from the firm’s latest annual report:

For 2016, net sales amount to $11,280,000, net income is $575,000, and preferred stock dividends paid are $42,000.

Required
Calculate the following ratios for 2016.

Round answers to two decimal places.

Dec. 31, 2016 Dec. 31, 2015 $552.000 31 2000 4.788000 200,000 55,860,000 55,064,000 5700,000 Quick assets Inventory and prepaid expenses Other assets 372,000 Total Assets 5724,000 $ Current liabilities 1096 Bonds payable 8% Preferred stock, $100 par value Common stock, $10 par value Retained earnings Total Liabilities and Stockholders Equity $5,850,000 $564,000 1,440,000 1440,000 430,000 2,700,000 2.160,000 420,000 480.000 516,000 $5,064,000 For 2016, net sales amount to $11,280,000, net income is s575,000, and preferred stock dividends paid are $42,000 Required Calculate the following ratios for 2016 Round answers to two decimal places. 1. Return on sales 2. Return on assets 9.82 3. Return on common stockholders equity x 96 4. Quick ratio 5. Current ratio 6. Debt-to-equity ratio

Explanation / Answer

Answer :-

A. Return on sales = ( Net Income /Net sales)

=( 575000/11280000)×100

= 5.1%

b. Return on assets = (Total Assets)/ Net Sales

= (5860000/11280000)×100

= 51.95%

3. Rturno on common stockholders equity = (Net Income - Pereference Dividend )/(Average Total Stockholders Equity - Average Preferred Stockholders Equity)

= (575000-42000)/[(270000+216000)/2] -[(480000+480000)/2]

= 27.33%

4. Quick Ratio = Quick Assets / Current Liabilities

= 700000/724000

= 0.97:1

5. Curren Ratio= Current Assets/Current Liabilities

= (700000+372000)/724000

= 1.48:1

6. Debt to Equity Ratio = Total Debt/ Stockholders Equity

=1440000/2700000

= 0.533

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