Question

Selected year-end financial statements of Cabot Corporation follow. (All sales were on credit; selected balance sheet amounts at December 31, 2016, were inventory, $51,900; total assets, $199,400; common stock, $89,000; and retained earnings, $29,269.) CABOT CORPORATION Income Statement For Year Ended December 31, 2017 Sales $ 453,600 Cost of goods sold 297,250 Gross profit 156, 350 Operating expenses 99,100 Interest expense 4,700 Income before taxes 52,550 Income taxes 21,169 Net income $ 31,381 Assets Cash $ CABOT CORPORATION Balance Sheet December 31, 2017 Liabilities and Equity $ 12,000 Accounts payable 9,600 Accrued wages payable 29,400 Income taxes payable 6,500 32,150 Long-term note payable, secured by mortgage on plant assets 3,100 Common stock 148,300 Retained earnings $ 241,050 Total liabilities and equity 18,500 3,000 4,500 Short-term investments Accounts receivable, net Notes receivable (trade) * Merchandise inventory 65,400 Prepaid expenses Plant assets, net Total assets 89,000 60, 650 $ 241,050 * These are short-term notes receivable arising from customer (trade) sales. 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.)

Answer 1

9)	Total Asset Turnover =			Net Sales / Average Total Assets
			=	$ 453600 / $ 220225
			=	2.059711659
	Average Total Assets =			(Beginning Total Assets + Ending Total Assets) /2
			=	($ 199400 + $ 241050) / 2
			=	$ 220,225.00
10)	Return on Total Assets =			Net Income / Average Total Assets
			=	$ 31381 / $ 220225
			=	14.2495%
	Average Total Assets =			(Beginning Total Assets + Ending Total Assets) /2
			=	($ 199400 + $ 241050) / 2
			=	$ 220,225.00
11)	Return on Common			Net Income / Shareholder's Equity
	stockholder's equity =
			=	$ 31381 / ($ 89000 + $ 60650)
			=	20.9696%