Given the financial statements for Jones Corporation and Smith Corporation: Comp

Question

Given the financial statements for Jones Corporation and Smith Corporation:

     

   

   

   

Compute the following ratios. (Use a 360-day year. Do not round intermediate calculations. Input your profit margin, return on assets, return on equity, and debt to total assets answers as a percent rounded to 2 decimal places. Round all other answers to 2 decimal places.)

JONES CORPORATION

Current Assets Liabilities Cash $ 127,000 Accounts payable $ 136,000 Accounts receivable 186,400 Bonds payable (long term) 81,600 Inventory 55,400 Long-Term Assets Stockholders' Equity Gross fixed assets $ 553,000 Common stock $ 150,000 Less: Accumulated depreciation 150,900 Paid-in capital 70,000 Net fixed assets* 402,100 Retained earnings 333,300 Total assets $ 770,900 Total liabilities and equity $ 770,900 Sales (on credit) $ 1,339,000 Cost of goods sold 788,000 Gross profit $ 551,000 Selling and administrative expense† 334,000 Depreciation expense 54,500 Operating profit $ 162,500 Interest expense 10,200 Earnings before taxes $ 152,300 Tax expense 99,000 Net income $ 53,300 *Use net fixed assets in computing fixed asset turnover. †Includes $15,200 in lease payments. SMITH CORPORATION Current Assets Liabilities Cash $ 40,000 Accounts payable $ 76,700 Marketable securities 13,200 Bonds payable (long term) 246,000 Accounts receivable 78,800 Inventory 77,800 Long-Term Assets Stockholders' Equity Gross fixed assets $ 551,000 Common stock $ 75,000 Less: Accumulated depreciation 258,600 Paid-in capital 30,000 Net fixed assets* 292,400 Retained earnings 74,500 Total assets $ 502,200 Total liabilities and equity $ 502,200 *Use net fixed assets in computing fixed asset turnover. SMITH CORPORATION Sales (on credit) $ 1,190,000 Cost of goods sold 695,000 Gross profit $ 495,000 Selling and administrative expense† 257,000 Depreciation expense 58,800 Operating profit $ 179,200 Interest expense 30,900 Earnings before taxes $ 148,300 Tax expense 55,700 Net income $ 92,600 †Includes $15,200 in lease payments. a. Compute the following ratios. (Use a 360-day year. Do not round intermediate calculations. Input your profit margin, return on assets, return on equity, and debt to total assets answers as a percent rounded to 2 decimal places. Round all other answers to 2 decimal places.) Jones Corp. Smith Corp.

JONES CORPORATION Current Assets Liabilities   Cash $ 127,000   Accounts payable $ 136,000   Accounts receivable 186,400   Bonds payable (long term) 81,600   Inventory 55,400 Long-Term Assets   Stockholders' Equity   Gross fixed assets $ 553,000   Common stock $ 150,000      Less: Accumulated depreciation 150,900   Paid-in capital 70,000      Net fixed assets* 402,100   Retained earnings 333,300        Total assets $ 770,900        Total liabilities and equity $ 770,900

Explanation / Answer

1. Net Profit Margin = Net Income/Sales

Jones= 53,300/1,339,000 = 3.98%

Smith= 92,600/1,190,000 = 7.78%

2. Return on assets = Net Income/Assets

Jones = 53,300/770,900 = 6.91%

Smith =92,600/502,200 = 18.44%

3. Return on equity = Net Income/Sales

Jones = 53,300/553,300 = 9.63%

Smith = 92,600/179,500 = 51.59%

4.Receivable turnover = Sales/Accounts Receivables

Jones = 1,339,000/186,400 = 7.183

Smith = 1,190,000/78,800 = 15.1015

5. Collection period = 365/Receivable turnover

Jones = 365/7.183 = 50.81days

Smith = 365/15.1015 =24.17 days

6. Inventory Turnover = Sales/Inventory

Jones = 1,339,000/55,400 = 24,169

Smith = 1,190,000/77,800 = 15.2956

7. Fixed asset turnover = Sales/Fixed Assets

Jones = 1,339,000/402,100 = 3.33

Smith = 1,190,000/292,400 = 4.07

8. Total assets turnover = Sales/ Total assdets

Jones = 1,339,000/770,900 = 1.74

Smith = 1,190,000/502,200 = 2.37

9. Current Ratio = Current Assets/ Current liabilties

Jones= 368,000/136,000 =2.71

Smith = 209,800/76,700 = 2.74

10. Quick ratio = (Current Assets - Inventory) / Current liabilties

Jones = 313,400/136,00 = 2,30

Smith = 132,000/7,6700 =1.72

11. Debt to assets = Long term debt/Total assets

Jones = 81,600/770,900 = 0.105

Smith = 246,000/502,200 =0.49

12. Times Interest Earned = (EBIT - Lease Expenses)/Interest

Jones = (162,500 -15,200)/10,200 = 14.44

Smith = (179,200 -15.200)/30,900 = 5.31

13. Fixed charge coverage ratio =( EBIT + Lease expense)/ (Interest + lease expenses)

Jones = 162,500/(10,200 + 15,200 ) = 6.40

Smith = 179,200/(30,900 + 15,200) = 3.89

Related Questions

Navigate

• Browse (All)
• Browse G
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.