Question

Calculate ratios. (10 4,5,6) AP E18-17 Rinker Corporation's comparative balance sheet is presented below. RINKER CORPORATION Balance Sheet December 31 2016 Cash Accounts receivable Inventory Land Buildings Accumulated depreciation--buildings Total Accounts payable Common shares Retained earnings Total 2017 $ 5,300 21,200 9,000 20,000 70,000 (15,000) $110,500 S 3,700 23,400 7,000 26,000 70,000 (10,000) $120,100 $ 10,370 75,000 25,130 $110,500 $ 31,100 69,000 20,000 $120,100 Rinker's 2017 income statement included net sales of $120,000, cost of goods sold of S70,000, and profit of $14,000. Instructions Calculate the following ratios for 2017. (a) Current ratio (b) Acid-test ratio (c) Receivables turnover (d) Collection period (c) Inventory turnover (f) Days sales in inventory (g) Profit margin (h) Asset turnover (i) Return on assets (i) Return on equity (k) Debt lo total assets

Answer 1

Ans. A	Current ratio   =   Total current assets / Total current liabilities
	$35,500 / $10,370
	3.42 : 1
	*Calculations for total current assets:
	Assets:	Amount
	Cash	$5,300
	Accounts receivable	$21,200
	Inventory	$9,000
	Total current assets (a)	$35,500
	*Accounts payable is the only current liability.
Ans. B	Quick ratio   =   (Total current assets - Inventory) / Total current liabilities
	($35,500 - $9,000) / $10,370
	$26,500 / $10,370
	2.56 : 1
Ans. C	Receivable turnover = Net credit sales / Average receivables
	$120,000 / $22,300
	5.38 times
	*Average receivable = (Beginning receivables + Ending receivables) / 2
	($23,400 + $21,200) / 2
	$22,300
Ans. D	Collection period = No. of days in year / Receivables turnover ratio
	365 / 5.38
	67.84 days
Ans. E	Inventory turnover = Cost of goods sold / Average Inventory
	$70,000 / $8,000
	8.75   times
	*Average inventory = (Beginning inventory + Ending inventory) / 2
	($7,000 + $9,000) / 2
	$8,000
Ans. F	Number of days sales in inventory = No. of days in year / Inventory turnover ratio
	365 / 8.75
	41.71 days
Ans. G	Profit Margin =   Profit / Sales * 100
	$14,000 / $120,000 * 100
	11.67%
Ans. H	Assets turnover = Sales / Average assets
	$120,000 / $115,300
	1.04	times
	*Average assets = (Beginning assets + Ending assets) / 2
	($120,100 + $110,500) / 2
	$115,300
Ans. I	Return on assets =   Net income / Average assets * 100
	$14,000 / $115,300 * 100
	12.14%
Ans. J	Return on equity =   Net income / Average stockholder's equity * 100
	$14,000 / $94,565 * 100
	14.80%
	*Total stockholder's equity = Common shares + Retained earnings
	Beginning stockholder's equity	$69,000 + $20,000	$89,000
	Ending stockholder's equity	$75,000 + $25,130	$100,130
	* Average Stockholder's equity =   (Beginning equity + Ending equity) / 2
	($89,000 + $100,130) / 2
	$94,565
Ans. K	Debt to assets ratio =   Total liabilities / Total assets * 100
	$10,370 / $110,500 * 100
	9.38%
	*There are no long term debts available, so the accounts payable will be equal
	to the total liabilities.