Question

SMOLIRA GOLF CORP 2017 and 2018 Balance Sheets 2018 Current liabilites 2017 2017 2018 Current Assets 34,385 37,837 Account payable 36,722 42,582 Cash Accounts Receivable 17,801 27,766 Notes payable 19,008 16,200 Inventory 36,310 42,632 Other 19,864 24,634 Total 88,496 108,235 Total 75,594 83,416 115,000 145,000 Fixed Assets Net plant and equipment 464,315 519,633 Long-term debt Owners' equity Common stock and paid-in surplus Accumulated retained earnings 55,000 55,000 307,217 344,452 362,217 399,452 Total Total liablities and owners' equity Total Assets 552,811.0 627,868 552,811 627,868 2018 Income Statement Sales 506,454 359,328 Cost of goods sold Depreciation 44,463 Earnings before interest and taxes 102,663 Interest paid 19,683 Taxable income 82,980 Taxes(25%) 20,745 Net Income 62,235 Dividends 25,000 37,235 Retained earnings 6. Calculate below ratios of for Smolira Golf Corp a. Current ratio b. quick ratio C. cash ratio d. total asset turnover e. inventory turnover f. receivables turnover g. total debt ratio h. debt-equity ratio i. equity multiplier j. profit margin k. return on assets 1. return on equity 7. Construct the DuPont identity for Smolira Golf Corp 8. Prepare the 2018 statement of cash flows for Smolira Golf Corp. 9. Smolira Golf Corp has 20,000 shares of common stock outstanding, and the market price for a share of stock at the end of 2018 was $58. What is the price-earnings ratio? What are the dividends per share? What is the market-to-book ratio at the end of 2018?

Answer 1

6) Ratios

a) Current Ratio = Current Assets / Current Liabilities

	Particulars	2017	2018
1	Current Assets	88,496	108,235
2	Current Liabilities	75,594	83,416
1 divided by 2	Current Ratio	1.17	1.30

b) Quick Ratio = (Current Assets - Inventory) / Current Liabilities

	Particulars	2017	2018
1	Current Assets	88,496	108,235
2	Inventory	(36,310)	(42,632)
3 = 1 Minus 2	Net Current assets for Quick Ratio	52,186	65,603
4	Current Liabilities	75,594	83,416
3 divided by 4	Quick Ratio	0.69	0.79

c) Cash Ratio = Cash & Cash Equivalents / Current Liabilities

	Particulars	2017	2018
1	Cash & Cash Equivalents	34,385	37,837
2	Current Liabilities	75,594	83,416
1 divided by 2	Cash Ratio	0.45	0.45

d) Total Asset Turnover ratio = Net Sales / Total Assets

	Particulars	2018
1	Net Sales	506,454
2	Total Assets	627,868
1 divided by 2	Total assets T/o Ratio	0.81

We Cannot Calculate this ratio for 2017 as Sales are not provided for 2017.

e) Inventory Turnover Ratio = Cost of Goods sold / Average Inventory

	Particulars	2018
a	Cost of Goods sold	359,328.0
b	Opeing Inventory	36,310.0
c	Closing Inventory	42,632.0
d = (b+c) / 2	Average Inventory	39,471.0
e = a / d	Inventory Turnover Ratio	9.10

f) Receivable Turnover Ratio = Net Credit Sales / Average Account receivables

	Particulars	2018
a	Net Credit Sales	506,454
b	Opeing Receivables	17,801
c	Closing Receivables	27,766
d = (b+c) / 2	Average Receivables	22,784
e = a / d	Inventory Turnover Ratio	22.23

It is assumed that all the sales given are credit sales as no information is given about cash sales

f) Total Debt Ratio = Total Debt / Total Assets

	Particulars	2017	2018
1	Total Debts	115,000	145,000
2	Total Assets	552,811	627,868
1 divided by 2	Total Debt Ratio	0.21	0.23

g) Debt Equity Ratio = Total Liabilities / Total Owners Equity

	Particulars	2017	2018
1	Total Liabilities	115,000	145,000
2	Total Owners equity	362,217	399,452
1 divided by 2	Debt Equity Ratio	0.32	0.36

h) Equity Multiplier = Total Assets / Owners Equity

	Particulars	2017	2018
1	Total Assets	552,811	627,868
2	Total Owners equity	362,217	399,452
1 divided by 2	Debt Equity Ratio	1.53	1.57

i) Profit Margin = Net Income / Sales

	Particulars	2018
1	Net Income	62,235
2	Sales	506,454
1 divided by 2	Profit Margin	0.12

j) Return on Assets = Net Income / Total Assets

	Particulars	2018
1	Net Income	62,235
2	Total Assets	627,868
1 divided by 2	Return on Assets	0.10

k) Return on Equity = Net Income / Owners Equtiy

	Particulars	2018
1	Net Income	62,235
2	Owners Equity	399,452
1 divided by 2	Return on Assets	0.16

Note - As more than One question is asked only First is solved.