Question

restre Calculat possible sequen EIN-1 1000) CHAPTER 18 Financial Statement Analysis balance sheet is presented below Rinker Corporations comparative 2016 3.700 $ Calaterte ( 56) AP RINKER CORPORATION Balance Sheet December 31 2017 $ 5.300 21,200 9,000 20,000 70,000 (15.000) $110,500 23.400 7.000 26,000 70,000 (10,000 $120,100 Cash Accounts receivable Inventory Land Buildings Accumulated depreciation-buildings $ 10.370 75,000 $ 31,100 69,000 20.000 $120,100 Total 25,130 $110,500 Accounts payable Common shares Retained earnings 700, and pooh Total Rinkers 2017 income statement included nc $14,000. Income statement included net sales of $120,000, cost of goods sold of $70,000 Instructions Calculate the following ratios for 2017. (a) Current ratio (b) Acid-test ratio (c) Receivables turnover (d) Collection period (e) Inventory turnover (f) Days sales in inventory (g) Profit margin (h) Asset turnover (i) Return on assets (i) Return on equity (k) Debt to total assets Diveco

Answer 1

(a) Current Ratio = 3.42

Current Assets
Cash	5300
Accounts receivables	21200
Inventory	9000
Total current assets ( CA )	35500
Current liabilities
Accounts payable	10370
Total current liabilities ( CL )	10370
Current ratio = CA / CL	3.42

(b) Acid test ratio = 2.55

Quick Assets
Cash	5300
Accounts receivables	21200
Total Quick Assets ( QA )	26500
Total current liabilities ( CL )	10370
Acid Test Ratio ( QA / CL )	2.55

(c) Receivables turnover ratio = 15 times

Accounts receivables 2017	9000
Acounts receivables - 2016	7000
Total	16000
Average accounts receivables	8000
Net Sales for 2017	120000
Receivables Turnover ratio	15

= ( Net sales / Avg Receivables)

(d) Collection period = 24 days

Collection period
= 365 days / Receivables turn over	24.33 days

(e) Inventory turnover = 3.04

Cost of goods sold	70000
Average Inventory
= ( 20000 + 26000 ) / 2	23000
Inventory turn over ratio	3.04

= Cost of goods sold / Average Inventory

(f) Days sales in Inventory = 120 days

Days sales in Inventory
= 365 / Inventory turn over ratio	119.92

(g) Profit margin = 11.67%

= Net Income / sales * 100

11.66667

(h) Assets turnover ratio = 1.04 times

Total assets - 2017	110500
Total assets - 2016	120100
Total	230600
Average total assets	115300
Sales	120000
Assets turnover ratio	1.04

(i) Return on assets = 12.14 %

Return on Assets
= Net Income / Total assets * 100	12.14%

(j) Return on equity = 14.80 %

= Net income / Equity * 100	14.80%
Equity - 2017	100130
Equity - 2016	89000
Average equity	94565

Note : Equity include common stock + retained earnings

(k) Debt / Total Assets = 10370 / 110500 = 0.09