Question

Ratios Compared with Industry Averages Packard Plastics, Inc., manufactures various plastic and synthetic products. Financial statement data for the firm follow: Sales revenue Cost of goods sold Net income Dividends Earnings per share 2013 (Thousands of Dollars, Except Earnings per Share) $1,141,000 756,000 50,500 19,600 4.04 Packard Plastics, inc. Balance Sheets (Thousands of Dollars) Dec. 31, 2013 Dec. 31, 2012 Assets Cash $5,740 $2,700 Accounts receivable (net) 93,660 60,900 Inventory 207,200 140,000 Total Current Assets 219,000 203,600 Plant assets (net) 215,000 194,000 Other assets 5,300 3,900 Total Assets $439,300 $401,500 Liabilities and Stockholders' Equity Notes payable-banks $43,400 $25,000 Accounts payable 38,640 23,000 Accrued liabilities 35,140 24,800 Total Current Liabilities 83,700 72,800 10% Bonds payable 150,000 150,000 Total Liabilities 233,700 222,800 Common stock, $10 par value (12,500,000 shares) 125,000 125,000 Retained earnings 80,600 53,700 Total Stockholders' Equity 205,600 178,700 Total Liabilities and Stockholders' Equity $439,300 $401,500 Required a. Using the given data, calculate items 1 through 8 below for 2013 for Packard Plastics, Inc. Round all answers to two decimal places.

Answer 1

Part A

Quick ratio	1.19
Current ratio	2.62
Account receivable turnover	14.76
Inventory turnover	4.35
Debt-to-equity ratio	1.14
Gross profit percentage	33.74%
Return on sales	4.43%
Return on assets	12.01%

Quick ratio = cash + accounts receivable / current liabilities = (5740+93660)/83700 = 1.19

Current ratio = current assets / current liabilities = 219000/83700 = 2.62

Accounts receivable turnover = sales / average accounts receivable =1141000/((93660+60900)/2) = 14.76

Inventory turnover = cost of goods sold / average inventory = 756000/((207200+140000)/2) = 4.35

Debt-to-equity ratio = total liabilities / total stockholders’ equity = 233700/205600 = 1.14

Gross profit percentage = gross profit / sales = (1141000-756000)/1141000 = 33.74%

Return on sales = net income / sales = 50500/1141000 = 4.43%

Return on assets = net income / average assets = 50500/((439300+401500)/2) = 12.01%

Part B

Dividend per share = dividend / number of outstanding shares = 19600/12500 = $1.57

Dividend payout ratio = dividend per share / EPS = 1.57/4.04 = 38.86%

Part C

Price earnings ratio = price per share / EPS = 44.75/4.04 = 11.08

Dividend yield ratio = dividend per share / price per share = 1.57/44.75 = 3.51%