Question

Help Selected year-end financial statements of Cabot Corporation follow. (All sales were on credit: selected balance sheet amounts at December 31, 2016, were inventory. $54,900; total assets, $179,400, common stock, $89,000, and retained earnings. $43,032) CABOT CORPORATION Income Statement For Year Ended December 31, 2017 Sales $ 454,600 Cost of goods sold 297.350 Gross profit 157,250 Operating expenses 99,200 Interest expense 4,600 Income before taxes 53,450 Income taxes 21,532 Net income $ 31,918 $ CABOT CORPORATION Balance Sheet December 31, 2017 Assets Liabilities and Equity Cash $ 20,000 Accounts payable Short-term 9 .600 Accrued wages payable investments Accounts receivable, net 34,000 Income taxes payable Notes receivable (trade) 7,500 Merchandise 32, 150 Long-term note payable, secured by inventory mortgage on plant assets Prepaid expenses 2.990 Common stock Plant assets, net 151,300 Retained earnings Total assets $257,450 Total liabilities and equity 17,500 3,000 4,600 68,400 89,000 74,950 $ 257.450 * These are short-term notes receivable arising from customer (trade) sales

Answer 1

Current Ratio Choose Numerator / Choose Denominator = Current Ratio Current Assets Current liabilities Current Ratio 2017: $ 106,150 / $25,100 = 4.23 to 1 Calculation: Current Awets = (Cash & Short term investments & Accounts Receivable, net & Merchandise Inventory & Notes Receivablet Prepaid expenses) = ($20,000 + $ 9,600+ $34,000 + $32,150 + $7, soot $2,900) = $ 106,150 Current liabilities = ( Accounts Payable + Auried wages Payable + Income Taxes payable) = ($17,500+ $5,000+ $4,600) = $25100 Ichoose Numerator Quick Assets 20172 $71,100 Acid Test Ratio / Choose Denominator = Acid Test Current liabilities = Acid Test $25,100 El 2.83 Ratio Ratio to 1

Calculation: Quick Assets = ( Current Amets - Merchandise Inventory-Prepaid expenses) = $106,150 - $32,150 - $2,900 = $71,100 I sales Uncollected Choose I Choose x days Days' sales Numerator Denominatori = Uncollected Current Net Days' sales Receivables sales X 365 = Uncollected 2017: $41,500 / $454,600 X 365 = 33.32 days Calculation: Current Receivables = Accounts Receivable, net+ Notes Receivable) = $34,000 & $7,500 = $41,500 Inventory turnover Choose Numerator / Choose Denominator Inventory Cost of goods sold / Average Inventory - Inventory 2017. & 297,350 $43,525 I 6.83 Turnover Turnover times

calculation: Average Inventory = (Beginnung Inventory & Ending Inventory) = 2 = ($54,900 432,150) = 2 - $87,050 - 2 = $43,525 Days' sales in Inventory Choose I choose Days' sales in Numerator Denominator & Days = Inventory Merchandise Cost of I Days' sales in Inventory / Goods sold & 365 = Inventory 2017: $32,150 / $ 297,350 x 365 = 39.46 days Ratility Debt-to-Equity Ratio Соо. Debt-to - Equity Choose Numerator Denoninator & Total liabilities / Total equity Debt-to - Equity Ratio 2017: $93.500 / $ 163,950 = 0.57 to 1 calculation: Total liabilities = (current liabilitiest long term notes payable] a $25,100 + $ 68,400 = $ 93,500 Current liabilities are calculated above in part (1) Total equity = Common stock & Retained Earnings & $ 89,000 + $ 74,950 - $ 163,950

Times Interest Earned Choose I Times Interest Choon Numerator Denominator 7 earned Income Interest Interest | Times Interest before tax t Expense Expense A Earned 2017! $53,450 + $4,600 1 $4,600 = 12.62 times 8 Profit margin Ratio Choose Nenerator / Choose Denominator = Profit margin Ratio Net Income / Net sales - Profit margin Ratio $31,918 1 $ 454,600 = 7:02 % 2017: Total Asset Turnover Choose Choose Total Asset Nemerator Denominator Turnover Average total Total Asset Net Sales Asets Turnover 2017: $454,600 1 $ 218,425 = 2.08 times Calculation: Average total Assets = (Beginning total Assets & Ending Total Assets) : 2 = ($179,400 + $257,450) = 2 - $436,850 - 2 = $218,425

Return on Total Assets Choose Choon Return on Total Numerator Denominator Assets Average lotal Return on total Net Income Assets Anrets 2017: $31,918 1 $218,4 25 = 14.61 % calculation : Average lotel Assets que calculateal above is part 19). Return on common stockholders' Equity I choose | Return on common Choose Numerator Denominator = stockholders' Equity Net TT Preferred Average Common Return on common Income 17 Dividends Stockholders' Equity Stockholders' Equity 2017: $31,918 - $0 $147,991 = 21.57 % Calculation: Average Common stockholders' Equity = (Beginning common stock + Ending common stock & Beginning Retained Earnings & Ending Retained Earnings) = 2 = ($ 89,000+ $89,000 + $ 43,032 + $74,950) = 2 - $295,982 - 2 = $147,99)