3) The following information relates to Bennett Corporation. Account Current yea
ID: 2590613 • Letter: 3
Question
3) The following information relates to Bennett Corporation.
Account
Current year
Prior year
Net sales (all credit)
$529,250
$499,500
Cost of goods sold
$379,575
$353,600
Gross profit
$149,675
$145,900
Income from operations
$95,500
$79,900
Interest expense
$23,500
$19,500
Net income
$57,385
$51,600
Cash
$26,000
$15,900
Accounts receivable, net
$33,800
$23,340
Inventory
$42,000
$30,300
Prepaid expenses
$2,000
$1,500
Total current assets
$103,800
$72,040
Total long-term assets
$62,000
$38,000
Total current liabilities
$46,000
$41,600
Total long-term liabilities
$20,000
$22,700
Common stock, no par,
4,990 shares, value $50/share
$30,000
$30,000
Required:
e-)What is the price-earnings ratio for the current year?
f-)What is the rate of return on total assets for the current year?
g-)What is the times-interest-earned ratio for the current year?
h-)What is the current ratio for the current year?
Account
Current year
Prior year
Net sales (all credit)
$529,250
$499,500
Cost of goods sold
$379,575
$353,600
Gross profit
$149,675
$145,900
Income from operations
$95,500
$79,900
Interest expense
$23,500
$19,500
Net income
$57,385
$51,600
Cash
$26,000
$15,900
Accounts receivable, net
$33,800
$23,340
Inventory
$42,000
$30,300
Prepaid expenses
$2,000
$1,500
Total current assets
$103,800
$72,040
Total long-term assets
$62,000
$38,000
Total current liabilities
$46,000
$41,600
Total long-term liabilities
$20,000
$22,700
Common stock, no par,
4,990 shares, value $50/share
$30,000
$30,000
Explanation / Answer
e) Price-arnings ratio = Market Value per Share / Earnings per Share
= $50 / ($57,385/4,990)
= 4.35 times
f) Rate of return on total asset = Operating income / Average total assets
= [$95,500 / {($103,800+$62,000) +($72,040+$38,000)}/2]
= $95,500/$137,920
= 69.24%
g) Times-interest-earned ratio = Income before interest and taxes / Interest expenses
= $95,500 / $23500 = 4.06 times
h) Current ratio = Current assets / current liabilities
= $103,800 / $46,000
= 2.26 times
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