Question

Can someone please explain how to do this problem please! I would greatly appreciate it?

Problem 13-4A Calculation of financial statement ratios LO P3 Selected year-end financial statements of Cabot Corporation follow. (All sales were on credit; selected balance sheet amounts at December 31, 2016, were inventory, $49,900; total assets, $229,400; common stock, $84,000; and retained earnings, $42,205.) CABOT CORPORATION Income Statement For Year Ended December 31, 2017 Sales $ 452,600 Cost of goods sold 298,350 Gross profit 154,250 Operating expenses 99,200 Interest expense 3,900 Income before taxes 51,150 Income taxes 20,605 Net income 30,545 CABOT CORPORATION

Answer 1

Current Ratio Choose Numerator Choose Denominator / Current assets $ 99, 450 Cwment liabilities $ 25,600 Current Ratio Cuorent Ratio 3.88 to 1 Calculation: Current Assets = 1 Cash & short-term investments Short-term investments + Accounts Receivable, net + Merchandise Inventory + Notes receivable & Prepaid expenses = ($ 12,000 + $ 8,800 + $ 33, 800 + $ 38,150 + $4,000 t & Current liabilities $ 99,450 Accounts Payable & Accrued wages. payable + Income taxes payable) = { $ 16,500 + $ 4,800 + $ 4,300) $ 25,600 Acid - Test Ratio Choose Numerator / Choose Denominator = Acid-Test Ratio Quick assets Current liabilities - Acid-Test Ratio $ 58,600 $ 25,600 2. 29 to 1 Calculation : Quick Assets = ( Current Assets - Merchandise Inventary - Prepaid expenses) = ($99,450 - $38,150 - $ 2,700) $ 58,600

Uncollected Days' sales Choose Choose Numerator Days Denominator X Days sales unco lected Days sales uncollected Current recevables Net sales x 365 $452, 600 x 365 = 30.48 day $ 37,800 Calculation Current receivables = it receivables = Accounts Receivables, net t Notes Receivable $ 33,800 + $ 4,000 $ 37,800 Inventory Twinover Choose Numerator / Choose Denominator = Inventory Turnover Cost of goods sold / Average inventory Inwentary Turnover $ 298,350 $ 44,025 = 6.70 times Calculation: Average Inventory = Average Inventory = Beginning inventory + Ending Inventory 2 ($ 49,900 + $ 38,150) 2 $ 88,050 42- & 44,025 Choose Numelatan Merchandise Inventory $ 30,150 Days sales in Inventory Choose Days sales in | Denominator & Days Fr ance Cost 01 x 365 = Days sales in goods sold Inventory / $ 298,350 x 365 = 46.67 days

Debt-to - Equity Ratio Choose Numerator / Choose Denominator Debt-to- Equity Ratio Total liabilities al Total equity - Debt-to-Equity Ratio $ 91,000 1 $ 156, 750 - 01 0.58 to 1] calculation Total liabilities = (current m'abilities & Long term notes payable) = $ 25,600 + $ 65,400 = $ 91,000 Total equity = Common stock & Retained earnings. = $ 84,000 + $ 72,750 = $ 156, 750 Times Choose Numerator interest 7 Expense Interest Earned Choose Denominator Interest = Expense Times Interest Earned Times Interest Earned Income become tax $ 3,900 14.16 times $ 51,150 + $ 3,900 Choose Numerator Profit - Margin Ratio Choose Denominator Profit margin Ratio Net sales Profit margin Ratio Net Income 6.75 % & 30,545 / $ 452,600

er Choose Numerator Net Sales Total Asset Turnover Choose Denominator = Total Auset Turnov- Average Total Total Asset Turnover Assets $ 230,575 = 1.90 times $ 452,600 / Calculation Average total assets = [(Beginning Total Assets + Ending Total Assets)+2) = ($229,400 +4247,750) = 2] - $477, 150-2 = $ 238,595 Return on Total Assets (10) Choose a Choose Numerator Return on total Assets Return on Total Assets 12.80 Denominator Average total $230, 575 / / Net Income $ 30,545 Calculation, Average total above in part (9) are calculated assets

- Return on Common Stockholders' equity Choose Numerator Choose Return on common Denominator stockholders' equity Net Preferred Average Retuin on common income Dividends common stockholders’equity stockholders' equityl & 30,545 - $0 $141,478 2159 % Calculation: Average common stockholders equity = [(Beginning common stock & Ending common stock & Beginning Retained earnings + Ending Retained earnings 2 = ($ 84,000 + $ 84,000+ $412, 205+ $ 73,750)+2] $ 282,955 = 2 = $ 141,478