Selected year-end financial statements of Cabot Corporation follow. (All sales w

Question

Selected year-end financial statements of Cabot Corporation follow. (All sales were on credit; selected balance sheet amounts at December 31, 2016, were inventory, $46,900; total assets, $219,400; common stock, $87,000; and retained earnings, $41,551.) CABOT CORPORATION Income Statement For Year Ended December 31, 2017 Sales Cost of goods sold Gross profit Operating expenses Interest expense Income before taxes Income taxes Net income $ 456,600 297,050 159,550 98,600 4,100 56,850 22,901 $ 33,949

Explanation / Answer

(4) Inventory Turnover = Cost of goods sold / Average Inventory

(5) Days' sales in inventory = 365 / Inventory Turnover OR  (Average Inventory / cost of goods sold ) * 365

(6) Debt-to-equity ratio = Long term debt / Stockholder's equity

Stockholder's equity = Common stock + Retained Earnings

YEAR NUMERATOR / DENOMINATOR = INVENTORY TURNOVER 2017 297,050 / 38,525 = 7.71 times

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