Selected year-end financial statements of Cabot Corporation follow. (All sales w
ID: 2592224 • Letter: S
Question
Selected year-end financial statements of Cabot Corporation follow. (All sales were on credit; selected balance sheet amounts at December 31, 2012, were inventory, $48,900; total assets, $189,400; common stock, $110,000; and retained earnings, $53,548.) CABOT CORPORATION Income Statement For Year Ended December 31, 2013 Sales Cost of goods sold $452,600 298,050 Gross profit Operating expenses Interest expense 154,550 99,100 4,100 Income before taxes Income taxes 51,350 20,686 Net income $ 30,664 CABOT CORPORATION Balance Sheet December 31, 2013 Assets Cash Short-term investments Accounts receivable, net Notes receivable (trade)* Merchandise inventory Prepaid expenses Plant assets, net Liabilities and Equity Accounts payable Accrued wages payable Income taxes payable Long-term note payable, secured $ 22,500 4,600 4,600 $ 12,000 9,200 33,400 3,000 34,150 2,650 149,300 by mortgage on plant assets Common stock Retained earnings 70,400 110,000 31,600 Total assets $243,700 Total liabilities and equity $243,700 These are short-term notes receivable arising from customer (trade) sales Required Compute the following: (1) current ratio, (2) acid-test ratio, (3) days' sales uncollected, (4) inventory turnover, (5) days' sales in inventory, (6) debt-to-equity ratio, (7) times interest earned, (8) profit margin ratio, (9) total asset turnover, (10) return on total assets, and (11) return on common stockholders' equity. (Use 365 days a year. Do not round intermediate calculations.) Current Ratio Choose Numerator: 1 Choose Denominator: -Current Ratio - Current Ratio 2013Explanation / Answer
Answer 1.
Current Assets = Cash + Short-team Investments + Accounts Receivable, net + Notes Receivable (trade) + Merchandise Inventory + Prepaid Expenses
Current Assets = $12,000 + $9,200 + $33,400 + $3,000 + $34,150 + $2,650
Current Assets = $94,400
Current Liabilities = Accounts Payable + Accrued Wages Payable + Income Taxes Payable
Current Liabilities = $22,500 + $4,600 + $4,600
Current Liabilities = $31,700
Current Ratio = Current Assets / Current Liabilities
Current Ratio = $94,400 / $31,700
Current Ratio = 2.98
Answer 2.
Quick Ratio = Quick Assets / Current Liabilities
Quick Ratio = (Current Assets - Merchandise Inventory - Prepaid Expenses) / Current Liabilities
Quick Ratio = ($94,400 - $34,150 - $2,650) / $31,700
Quick Ratio = 1.82
Answer 3.
Days’ Sales Uncollected = Current Receivable / Sales * 365
Days’ Sales Uncollected = (Accounts Receivable, net + Notes Receivable (trade)) / Sales * 365
Days’ Sales Uncollected = ($33,400 + $3,000) / $452,600 * 365
Days’ Sales Uncollected = $36,400 / $452,600 * 365
Days’ Sales Uncollected = 29.35 days
Answer 4.
Average Inventory = (Inventory, Dec. 31, 2012 + Inventory, Dec. 31, 2013) / 2
Average Inventory = ($48,900 + $34,150) / 2
Average Inventory = $41,525
Inventory Turnover = Cost of Goods Sold / Average Inventory
Inventory Turnover = $298,050 / $41,525
Inventory Turnover = 7.18
Answer 5.
Days’ Sales in Inventory = 365 / Inventory Turnover
Days’ Sales in Inventory = 365 / 7.18
Days’ Sales in Inventory = 50.84 days
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