Question

Given the financial statements for Jones Corporation and Smith Corporation JONES CORPORATION Current Assets Liabilities Cash Accounts receivable Inventory $ 25,800 Accounts payable S188,000 80,400 88,700 54,200 Bonds payable (long term) Long-Term Assets Stockholders' Equity $578,000 153,900 Gross fixed assets Common stock $150,000 70,000 104,400 $592,800 Less: Accumulated Paid-in capital 424,100 Retained earnings $592,800 Net fixed assets* Total assets Total liabilities and equity Sales (on credit) Cost of goods sold Gross profit Selling and administrative $1,717,000 782,000 $935,000 283,000 nse Depreciation expense Operating profit Interest expense Earnings before taxes $ 598,700 10,000 ax nse Net income $495,500 Use net fixed assets in computing fixed asset turnover tIncludes $11,100 in lease payments. SMITH CORPORATION Current Assets Liabilities Cash Marketable securities Accounts receivable Inventory $ 36,100 Accounts payable S 84,700 251,000 10,800 Bonds payable (ong term) 77,300 75,300 Long-Term Assets Stockholders' Equity 75,000 30,000 78,100 $518,800 Gross fixed assets $576,000 256,700 Common stock Less: Accumulated Paid-in capital Net fixed assets* Total assets 319,300 Retained earnings $518.800 Total liabilities and equity "Use net fixed assets in computing fixed asset turnover SMITH CORPORATION Sales (on credit) Cost of goods sold Gross profit Selling and administrative expense Depreciation expense Operating profit Interest expense Earnings before taxes lax expense Net income $1,540,000 1,110,000 $ 430,000 229,000 51,700 $ 149,300 29,500 119,800 40,100 Includes $11,100 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.)

Answer 1

	Formula	Jones Corporation	Smith Corporation
	Profit Margin=Net Income/Sales
	Net Income=(A)	$                  4,95,500.00	$                                79,700.00
	Sales=(B)	$               17,17,000.00	$                          15,40,000.00
	Profit Margin=(A)/(B)	28.86%	5.18%
	Return of Assets=Net Income/Total Assets
	Net Income=(C )	$                  4,95,500.00	$                                79,700.00
	Total Assets=(D )	$                  5,92,800.00	$                            5,18,800.00
	Return of Assets=(C )/(D)	83.59%	15.36%
	Return on Equity
	Net Income/Equity
	Net Income=(A)	$                  4,95,500.00	$                                79,700.00
	Equity
	Common Stock	$                  1,50,000.00	$                                75,000.00
	Paid in Capital	$                     70,000.00	$                                30,000.00
	Retained Earnings	$                  1,04,400.00	$                                78,100.00
	Total Equity=(B)	$                  3,24,400.00	$                            1,83,100.00
	Return on Equity=(A)/(B)	152.74%	43.53%
	Receivable Turnover
	Sales/Debtors
	Sales=(A)	$               17,17,000.00	$                          15,40,000.00
	Debtors=(B)	$                     88,700.00	$                                77,300.00
	Receivable Turnover=(A)/(B)	19.36	19.92	Times
	Average collection period
	360/Receivable Turnover
	Days=(A)	360	360
	Receivable Turnover=(B)	19.36	19.92
	Average collection period=(A)/(B)	18.60	18.07	Days
	Inventory Turnover
	Cost of goods sold/Inventory
	Cost of goods sold=(A)	$                  7,82,000.00	$                          11,10,000.00
	Inventory=(B)	$                     54,200.00	$                                75,300.00
	Inventory Turnover=(A)/(B)	14.43	14.74	Times
	Fixed Assets Turnover
	Sales/Fixed Assets
	Sales=(A)	$               17,17,000.00	$                          15,40,000.00
	Fixed Assets=(B)	$                  4,24,100.00	$                            3,19,300.00
	Fixed Assets Turnover=(A)/(B)	4.05	4.82	Times
	Total Assets Turnover
	Sales=(A)	$               17,17,000.00	$                          15,40,000.00
	Total Assets=(B)	$                  5,92,800.00	$                            5,18,800.00
	Total Assets Turnover=(A)/(B)	2.90	2.97	Times
	Current Ratio
	Current Assets/Current Liabilites
	Current Assets
	Cash	$                     25,800.00	$                                36,100.00
	Marketable Securities		$                                10,800.00
	Accounts Receivable	$                     88,700.00	$                                77,300.00
	Inventory	$                     54,200.00	$                                75,300.00
	Total Current Assets=(A)	$                  1,68,700.00	$                            1,99,500.00
	Current Liabities
	Accounts Payable	$                  1,88,000.00	$                                84,700.00
	Total Current Liabilites=(B)	$                  1,88,000.00	$                                84,700.00
	Current Ratio=(A)/(B)	0.90	2.36
	Quick Ratio
	Quick Assets
	Cash	$                     25,800.00	$                                36,100.00
	Marketable Securities		$                                10,800.00
	Accounts Receivable	$                     88,700.00	$                                77,300.00
	Total Quick Assets=(A)	$                  1,14,500.00	$                            1,24,200.00
	Current Liabities
	Accounts Payable	$                  1,88,000.00	$                                84,700.00
	Total Current Liabilites=(B)	$                  1,88,000.00	$                                84,700.00
	Quick Ratio=(A)/(B)	0.61	1.47
	Debt to total Assets
	Debt/Total Assets
	Debt
	Accounts Payable	$                  1,88,000.00	$                                84,700.00
	Bonds Payable	$                     80,400.00	$                            2,51,000.00
	Total Debt=(A)	$                  2,68,400.00	$                            3,35,700.00
	Total Assets=(B)	$                  5,92,800.00	$                            5,18,800.00
	Debt /Total Assets=(A)/(B)	45.28%	64.71%
	Times Interest Earned
	Earnings before interest & tax/Interest
	Earnings before interest & tax=(A)	$                  5,98,700.00	$                            1,49,300.00
	Interest=(B)	$                     10,000.00	$                                29,500.00
	Earnings before interst &tax/Interest=(A)/(B)	59.87	5.06	Times