Test Problems 1.3 Use the information below to compute the Cash Flow from Assets
ID: 2735831 • Letter: T
Question
Test Problems 1.3
Use the information below to compute the Cash Flow from Assets (2 points per step) and Financial Ratios (2 points per step). (Total 18 points)
2015
2014
Balance Sheet:
Current Assets
Current Liabilities
Net Fixed Assets
Long-Term Debt
Common Stock
Income Statement/Other:
Depreciation Expense
EBIT
Interest Expense
Taxes
Net Income
Dividends
$ 4,771
1,532
17,107
10,650
7,000
$ 1,611
3,396
1,282
740
1,374
800
$ 6,127
4,194
17,489
9,800
7,500
Calculate the following ratios:
1. Current Ratio for 2015
2. Times Interest Earned for 2015
3. Return on Assets for 2015
show work please
2015
2014
Balance Sheet:
Current Assets
Current Liabilities
Net Fixed Assets
Long-Term Debt
Common Stock
Income Statement/Other:
Depreciation Expense
EBIT
Interest Expense
Taxes
Net Income
Dividends
$ 4,771
1,532
17,107
10,650
7,000
$ 1,611
3,396
1,282
740
1,374
800
$ 6,127
4,194
17,489
9,800
7,500
Explanation / Answer
1) Current ratio for year 2015 = Current assets / Current liabilities
= 4771 / 1532
= 3.1142 : 1
2) Times Interest Earned for 2015 = EBIT / Interest
= 3396 / 1282
= 2.65 Times (approx)
3) Return on assets = Net income / Average total assets
Average total assets = Total assets for year 2014 + Total assets for year 2015 / 2
= [6127 + 17489] + [4771 + 17107] / 2
= 23616 + 21878 / 2
= 45491 / 2 = $ 22747
Return on assets for year 2015 = 1374 / 22747 = 0.0604 [6.04 %]
Return on assets for year 2015 = 6.04 %.
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