Question

Analysis of Activity Measures Based on the comparative income statement and balance sheet of Cowan Kitchen Counters, Inc., that follow: 20-1 $2,163,000 Cowan Kitchen Counters, Inc. Comparative Income Statement For Years Ended December 31, 20-2 and 20-1 20-2 Net Sales (all on account) $2,584,000 Cost of goods sold 1,868,200 Gross profit $715,800 Operating expenses 315,200 Other expense (interest) 24,200 Income tax expense 176,800 Net income $199,600 1,616,800 $546,200 221,800 24,200 106,300 $193,900

Answer 1

Cowan Kitchen Counter inc.

a. Account Receivable Turnover Ratio= Net Sales/ Average Accoutn Recivable

=2584000/850500=3.038 times

* Average Account Receivable = (903500+797500)/2

b. Inventory Turnover Ratio= Net Sales/ Average Inventory Turnover

=2584000/948600=2.72 times

* Average Inventory = (983600+913600)/2

C. Asset Turnover Ratio= Net Sales/ Average Asset

=2584000/2878600=0.90times

* Average Asset = (2991600+2765600)/2

a. Profit Margin Ratio= Net Income / net Salss

=199600/2584000= 7.72%

b. Return on Asset= Net Income / Average Asset

=199600/2878600=6.93%

* Average Asset = (2991600+2765600)/2

c. Return on Common Stockholder Equity= Net Income / Average Stockholder Equity

=199600/2031100=9.83%

* Average Common Stock holder Equity = (2068600+1993600)/2

d. Earning per Share= net Income / Average No. of Stock

=199600/180000=1.11