Question

Selected current year-end financial statements of Cabot Corporation follow. (All sales were on credit; selected balance sheet amounts at December 31 of the prior year were inventory, $54,900; total assets, $259,400; common stock, $81,000; and retained earnings, $34,712.) CABOT CORPORATION Income Statement For Current Year Ended December 31 Sales $ 454,600 Cost of goods sold 297,850 Gross profit 156, 750 Operating expenses 99,100 Interest expense 4,000 Income before taxes 53,650 Income tax expense 21,612 Net income 32,038 $ Assets Cash Short-term investments Accounts receivable, net Merchandise inventory CABOT CORPORATION Balance Sheet December 31 Liabilities and Equity $ 10,000 Accounts payable 9,200 Accrued wages payable 29,400 Income taxes payable 40,150 Long-term note payable, secured by mortgage on plant assets 2,700 Common stock 149,300 Retained earnings $ 240,750 Total liabilities and equity 16,500 4,600 3,500 68,400 Prepaid expenses Plant assets, net Total assets 81,000 66,750 $ 240, 750 Required: Compute the following: (1) current ratio, (2) acid-test ratio, (3) days' sales uncollected, (4) inventory turnover, (5) days' sales in inventory (6) debt-to-equity ratio, (7) times interest earned, (8) profit margin ratio, (9) total asset turnover, (10) return on total assets, and (11) return on common stockholders' equity. (Do not round Intermediate calculations.) Compute the total asset turnover. (9) Total Asset Turnover Choose Denominator: Choose Numerator: = = Total Asset Turnover Total asset turnover 0 times Compute the return on total assets. (10) Return on Total Assets Choose Denominator: Choose Numerator: = Return on Total Assets Return on total assets Compute the return on common stockholders' equity. (11) Return on Common Stockholders' Equity Choose Denominator Choose Numerator: = Return On Common Stockhol Return on common stockholders

Answer 1

9			Total Asset Turnover
			Choose Numerator	/	Choose Denominator	=	Total Asset Turnover
			Total Sales	/	Avg Assets	=	Total Asset Turnover
			454,600	/	250,075	=	1.82
10			Return on Total Asset
			Choose Numerator	/	Choose Denominator	=	Return on Total Asset
			EBIT	/	Avg Assets	=	Return on Total Asset
			57,650	/	250,075	=	0.23
11			Return on Common Stockholders' Equity
	Choose Numerator			/	Choose Denominator	=	Return on Common Stockholders' Equity
	Net Income	-	Preferred Dividend	/	Avg. Common Stockholders' Equity	=	Return on Common Stockholders' Equity
	32,038	-	0	/	81,000	=	0.40
	Working
	Avg. Asset		(259,400 + 240,750)/2
	EBIT		(156,750 - 99,100)
	Avg. Common Stockholders' Equity
			(81,000 + 81,000)/2