Question

Financial statements for Thornton Company follow.

THORNTON COMPANY
Balance Sheets As of December 31
	2019				2018
Assets
Current assets
Cash	$	24,000			$	20,000
Marketable securities		21,600				7,600
Accounts receivable (net)		57,000				49,000
Inventories		142,000				150,000
Prepaid items		26,000				11,000
Total current assets		270,600				237,600
Investments		22,000				15,000
Plant (net)		290,000				275,000
Land		29,000				24,000
Total assets	$	611,600			$	551,600
Liabilities and Stockholders’ Equity
Liabilities
Current liabilities
Notes payable	$	40,000			$	17,300
Accounts payable		113,800				100,000
Salaries payable		25,000				19,000
Total current liabilities		178,800				136,300
Noncurrent liabilities
Bonds payable		140,000				140,000
Other		31,000				26,000
Total noncurrent liabilities		171,000				166,000
Total liabilities		349,800				302,300
Stockholders’ equity
Preferred stock, (par value $10, 4% cumulative, non-participating; 6,000 shares authorized and issued)		60,000				60,000
Common stock (no par; 50,000 shares authorized; 10,000 shares issued)		60,000				60,000
Retained earnings		141,800				129,300
Total stockholders’ equity		261,800				249,300
Total liabilities and stockholders’ equity	$	611,600			$	551,600

THORNTON COMPANY
Statements of Income and Retained Earnings For the Years Ended December 31
	2019				2018
Revenues
Sales (net)	$	390,000			$	370,000
Other revenues		11,200				8,200
Total revenues		401,200				378,200
Expenses
Cost of goods sold		195,000				151,000
Selling, general, and administrative		71,000				66,000
Interest expense		12,800				12,000
Income tax expense		103,000				102,000
Total expenses		381,800				331,000
Net earnings (net income)		19,400				47,200
Retained earnings, January 1		129,300				89,000
Less: Preferred stock dividends		2,400				2,400
Common stock dividends		4,500				4,500
Retained earnings, December 31	$	141,800			$	129,300

Required

Calculate the following ratios for 2019 and 2018. Since 2017 numbers are not presented, do not use averages when calculating the ratios for 2018. Instead, use the number presented on the 2018 balance sheet.

1. Working capital.
2. Current ratio. (Round your answers to 2 decimal places.)
3. Quick ratio. (Round your answers to 2 decimal places.)
4. Receivables turnover (beginning receivables at January 1, 2018, were $50,000). (Round your answers to 2 decimal places.)
5. Average days to collect accounts receivable. (Round your intermediate calculations to 2 decimal places and your final answers to the nearest whole number.)
6. Inventory turnover (beginning inventory at January 1, 2018, was $156,000). (Round your answers to 2 decimal places.)
7. Number of days to sell inventory. (Round your intermediate calculations to 2 decimal places and your final answers to the nearest whole number.)
8. Debt to assets ratio. (Round your answers to the nearest whole percent.)
9. Debt to equity ratio. (Round your answers to 2 decimal places.)
10. Number of times interest was earned. (Round your answers to 2 decimal places.)
11. Plant assets to long-term debt. (Round your answers to 2 decimal places.)
12. Net margin. (Round your answers to 2 decimal places.)
13. Turnover of assets. (Round your answers to 2 decimal places.)
14. Return on investment. (Round your answers to 2 decimal places.)
15. Return on equity. (Round your answers to 2 decimal places.)
16. Earnings per share. (Round your answers to 2 decimal places.)
17. Book value per share of common stock. (Round your answers to 2 decimal places.)
18. Price-earnings ratio (market price per share: 2018, $12.55; 2019, $14.10). (Round your intermediate calculations and final answer to 2 decimal places.)
19. Dividend yield on common stock. (Round your answers to 2 decimal places.)

Answer 1

		Formula	2,019.00	2,018.00
1.00	Working Capital	Current Assets- Current Liabilities
		Current Assets	2,70,600.00	2,37,600.00
		Current liabilites	1,78,800.00	1,36,300.00
		Answer	91,800.00	1,01,300.00
2.00	Current Ratio	Current Assets/ Current Liabilities
		Current Assets	2,70,600.00	2,37,600.00
		Current liabilites	1,78,800.00	1,36,300.00
		Answer	1.51	1.74
3.00	Quick Ratio	Current Assets- Inventory- Prepaid Assets/ Current liabilities
		Current Assets- Inventory- Prepaid Assets	1,02,600.00	76,600.00
		Current liabilites	1,78,800.00	1,36,300.00
		Answer	0.57	0.56
4.00	Receivable Turnover	Net credit sale/ Average accounts recievable
		Net credit sale	3,90,000.00	3,70,000.00
		Average accounts recievable ( Opening + Closing)	53,000.00( 57000+49000/2)	49,500.00 ( 49000+50000/2)
		Answer	7.36	7.47
5.00	Average days to Accounts Recievable	365 days/Recievable Turnover Ratio	49.60	48.83
6.00	Inventory Turnover	Net credit sale/ Average Inventory
		Net credit sale	3,90,000.00	3,70,000.00
		Average Inventory	1,46,000.00 ( 150000+142000/2)	1,53,000.00( 156000+150000/2)
		Answer	2.67	2.42
7.00	No of days to sell inventory	365 days/ Inventory Turnover Ratio	136.64	150.93
8.00	Debt to asset ratio	Debt/Asset
		Debt	1,40,000.00	1,40,000.00
		Asset	6,11,600.00	5,51,600.00
		Answer	0.23	0.25
9.00	Debt to equity Ratio	Debt/Equity
		Debt	1,40,000.00	1,40,000.00
		Equity	2,61,800.00	2,49,300.00
		Answer	0.53	0.56
10.00	No of times interest earned	EBIT/ Interest
		EBIT ( Earning before interest and tax)	=19400+12800+103000= 135200	=47200+12000+102000=161200
		Interest	12800	12000
		Answer	10.56	13.43