Question

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, $47,900; total assets, $209,400, common stock, $90,000; and retained earnings, $37,678.) CABOT CORPORATION Income Statement For Year Ended December 31, 2017 Sales $ 453,600 Cost of goods sold 298,450 Gross profit 155, 150 Operating expenses 99,200 Interest expense 4,000 Incone before taxes 51,950 Income taxes 20,928 Net Income $ 31,022 Assets Cash Short-term Investments Accounts receivable, net Notes receivable (trade) Merchandise inventory CABOT CORPORATION Balance Sheet December 31, 2017 Liabilities and Equity $ 20,000 Accounts payable 8,800 Accrued wages payable 31.200 Income taxes payable 7.500 34,150 Long-term note payable secured by mortgage on plant assets 2,450 Comon stock 148300 Retained earnings $ 252,400 Total liabilities and equity 19,500 4,200 4,600 65,469 Prepaid expenses Plant assets, net Total assets 90,000 68700 $ 252,400 These are short term notes receivable arising from customer (trade) sales. Required: Compute the following current ratio. (2acid.test ratio. (3) days sales uncollected. (4) Inventory turnover. (5) days' sales in inventory Oldebro equitration times interest earned. (8) profit margin ratio (9) total asset turnover (10) return on total assets, and (m) return on common stockholders' equity. (Do not found intermediate calculations.) Answer is complete but not entirely correct.

Answer 1

1)Current ratio

Current Assets	/	Current Liabilities =	Current Ratio
$104,100	/	$28,300	= 3.68 times to 1

2)Acid test ratio

Quick Assets	/	Current Liabilities	= Acid test ratio
$67,500	/	$28,300	= 2.39 times

3)Day sales uncollected

Average Account receivable (Incl notes receivable)	/	Net Sales	×	365	=Day sales uncollected
$38,700	/	$453,600	×	365	= 31 days

6)Debt to equity ratio

Total Liabilities	/	Total Equity	= Debt equity ratio
$93,700	/	$158,700	= 0.59 or 59%.

Current Assets = Cash + Short term investment + Account receivable(incl notes receivable) + inventory + Prepaid expenses.

Current Liabilities = Accounts Payable + Interest accrued payable + Income tax payable.

Total Liabilities = Current Liabilities + long term notes payable.

Total equity = Common stock + Retained Earnings.

Quick Assets = Cash + Short term investments + Account receivable( Incl notes receivable).

If you have any doubts please comment on the answer.