Question

Exercise 13-13 The condensed financial statements of Cullumber Company for the years 2016 and 2017 are presented below. CULLUMBER COMPANY Balance Sheets December 31 (in thousands) 2017 2016 Current assets Cash and cash equivalents Accounts receivable (net) Inventory Prepaid expenses $330 $360 650 580 620 550 130 160 1,730 1,650 410 380 190 190 530510 $2,860 $2,730 $1,000 $970 540 1,220 1,220 Total current assets Property, plant, and equipment (net) Investments Intangibles and other assets Total assets Current liabilities Long-term liabilities Stockholders' equity-common 640 Total liabilities and stockholders' equity $2,860 $2730 lus.com/edugen/shared/assignment/test/aglist.uni?id-asnmt2358197 N10036

Answer 1

Answer to Requirement a.

2017:
Current Ratio = Current Assets / Current Liabilities
Current Ratio = $1,730 / $1,000
Current Ratio = 1.73: 1

2016:
Current Ratio = Current Assets / Current Liabilities
Current Ratio = $1,650 / $970
Current Ratio = 1.70: 1

Answer to Requirement b.

2017:
Inventory Turnover = Cost of Goods Sold / Average Inventory
Average Inventory = ($620 + $550)/2 = $585

Inventory Turnover = $1,150 / $585
Inventory Turnover = 1.97

2016:
Inventory Turnover = Cost of Goods Sold / Average Inventory
Average Inventory = ($550 + $380)/2 = $465

Inventory Turnover = $1,070 / $465
Inventory Turnover = 2.30

Answer to Requirement c.

2017:
Profit Margin = Net Income / Sales * 100
Profit Margin = $240 / $3,960 * 100
Profit Margin = 6.1%

2016:
Profit Margin = Net Income / Sales * 100
Profit Margin = $120 / $3,620 * 100
Profit Margin = 3.3%

Answer to Requirement d.

2017:
Return on Assets = Net Income / Average Total Assets * 100
Average Total Assets = ($2,860 + $2,730) / 2
Average Total Assets = $2,795

Return on Assets = $240 / $2,795 * 100
Return on Assets = 8.6%

2016:
Return on Assets = Net Income / Average Total Assets * 100
Average Total Assets = ($2,730 + $2,700) / 2
Average Total Assets = $2,715

Return on Assets = $120 / $2,715 * 100
Return on Assets = 4.4%