Question

Selected current year-end financial statements of Cabot Corporation follow. (All sales were on credit; selected balance sheet amounts at December 31 of the prior year were inventory, $49,900; total assets. $199,400; common stock, $81,000; and retained earnings, $29,718.) CABOT CORPORATION Income Statement For Current Year Ended December 31 Sales $ 448,600 Cost of goods sold 297,050 Gross profit 151,550 Operating expenses 99, 300 Interest expense 3,800 Income before taxes 48,450 Income tax expense 19,518 Net Income $ 28,932 Assets Cash Short-term investments Accounts receivable, net Merchandise inventory CABOT CORPORATION Balance Sheet December 31 Liabilities and Equity 8,000 Accounts payable 8,200 Accrued vages payable 34,000 Income taxes payable 32,150 Long-tern note payable, secured by mortgage on plant assets 3,100 Common stock 148,300 Retained earnings $ 233,750 Total liabilities and equity 18,500 3,000 3,200 69,400 Prepaid expenses Plant assets, net Total assets 81.000 58,650 $ 233,750 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. (Do not round intermediate calculations.)

Answer 1

/ Choose Numerator Current Assets Current Ratio Choose Denominator Current Liabilities 24700 Current Ratio Current Ratio 3.46 35450 Current Assets = Cash + Short term Investment +Accounts receivables+Merchandise inventory+prepaid expense Current Liabilities accounts payable +wages payable income tax payable Choose Numerator Quick Assets 50200 / / Acid Test Ratio Choose Denominator Current Liabilities 24700 = = Acid Test Ratio Acid Test Ratio 2.03 Quick Assets = Cash +Short term Investment +Accounts receivables Days' Sales Uncollected X / Choose Numerator Account Receivables 34000 Choose Denominator Net Sales 448600 Days 365 365 Days' Sales Uncollected Days' Sales Uncollected 27.66 / Choose Numerator Cost of Goods Sold 297050 Inventory Turnover Choose Denominator Average Inventory 4 1025 Inventory Turnover Inventory Turnover 7.24 = Average Inventory = beginning inventory + ending inventory/2 = (49900 + 32150)/241024 / Choose Numerator Inventory 32150 Choose Denominator Cost of eoods sold 2 97050 Days' Sales in inventory x Days 365 x 365 = = Days" Sales in inventory Days' Sales in inventory 39.50 / Choose Numerator Total Liabilities 94100 Debt to Equity Ratio Choose Denominator Total Equity 139650 = Debt to Equity Ratio Debt to Equity Ratio 0.67 Total Liabilities = accounts payable wages payable income tax payable + note term note payable Total Equity = Common Stock +Retained earning Choose Numerator Income Before Tax + Interest Expense 48450 Times interest Earned 1 Choose Denominator Interest Expense 3800 = = Times Interest Earned Times Interest Farned 13.75 3800 Z Choose Numerator Net Income 28932 / / / Profit Marcin Ratio Choose Denominator Net Sales 448600 = = Profit Margin Ratio Profit Margin Ratio 6.45% 7 Choose Numerator Net Sales 448600 Total Asset Turnover Choose Denominator Average Total Assets 216575 Total Asset Turnover 2.07 Average Assets = beginning assets +ending assets /2 = (199400 + 233750)/2=216575 10 Choose Numerator Net Income 28932 Return on Total Assets Choose Denominator Average Total Assets 216575 / / = = = Return on Total Assets Return on Total Assets 13.36% 11 Net Income 29922 Return on Common Stockholder's Equity Choose Numerator Choose Denominator Preffered Dividend / Avg. Common Stockholder's Equity / 125184 = Return on Common Stockholder's Equity - Return on Common Stockholder's Equity 23.11% Average equity = beginning stock + beginning retained earning + endingstock + ending retained earning /2