Question

Please follow the report and answer the following question. show work

Consolidated Statements of Earnings $ $ in milions excent per common share amounts) Revenue Cost of products sold Gross margin 2019 145,534 138,700 6,834 2018 2010 136,809 $ 129,628 7,181 2017 129,976 123,432 6 ,544 3.775 Operating expenses: Distribution, selling, general and administrative expenses Restructuring and employee severance Amortization and other acquisition-related costs Impairments and gain loss on disposal of assets, net Litigation (recoveries)/charges, net Operating earnings 4.480 125 621 (488) 36 2,060 4,596 176 707 1,417 527 18 48 2,120 126 15 23 (5) 201 294 Other (income expense, net Interest expense, net Loss on extinguishment of debt Earnings (loss) before income taxes 2 1.751 (228) Provision for benefit from) income taxes Net earnings 386 1,365 (487) 259 1.294 Less: Net earings attributable to noncontrolling interests Net earnings attributable to Cardinal Health, Inc. (2) 1,363 (3) 256 (6) 1.288 $ $ $ Earnings per common share attributable to Cardinal Health, Inc. Basic $ 0.82 $ 4.06 4.55 4.53 Diluted 0.81 4.03 Weighted-average number of common shares outstanding: Basic 313 315 317 320 Dluted 301 The accompanying notes are an integral part of these consolidated statements,

Answer 1

a) quick ratio for 2019

Quick Ratio = (Current Assets – Inventory - Prepaid Expenses) ÷ Current Liabilities

The quick ratio only considers the most liquid assets, so you would need to exclude inventory and prepaid expenses. This ratio will tell you the percentage of your firm’s debts that you can pay off with the most liquid assets.

For 2019 : Current Assets = $25,747 million, Inventory = $12,822 million , Prepaid expenses = $1946 million

Cuurent Liabilities = $24,109 million

$\therefore$ quick ratio = ( $25,747 - $12,822 - $1946) / $24,109 = $10,979/$24,109

$\therefore$quick ratio = 0.457 (too low)

b) Gross margin ratio for 2019

gross margin ratio = (gross profit / net sales) X 100

In 2019, gross profit = $6,834 million (written as gross margin in the consodidated statement of earnings),

net sales = $145,534 million

$\therefore$gross margin ratio = ($6,834/ $145,534) X 100 = 4.696%

c)Return on common equity for 2019

ROCE %= (Net Income (NI)/ Average Common Shareholder’s Equity) X 100

Average Common Equity = (Common Equity at t-1 + Common Equity at t) / 2

In 2019, Net income = $1,363 million, common equity in 2019 =  $2,763 million,

common equity in 2018 = $2,730 million   

$\therefore$ Average common equity = ($2,763 + $2,730) / 2 = $2,746.5

$\therefore$ ROCE % = ($ 1,363 / $2,746.5) X 100 = 49.63%

Therefore Return on common equity for 2019 is 49.63%

d) Inventory turnover ratio for 2019

Inventory Turnover Ratio = Cost of Goods Sold / Average Stock (or closing stock)

For 2019, Cost of goods sold = $138,700 million , Closing stock = $12,822 million (This is given by inventories under current assets in consolidated balance sheet)

$\therefore$Inventory Turnover Ratio = $138,700 / $12,822 = 10.817

e) Tax rate for 2019

Tax rate = (provisions for tax / income earned before tax) X 100

In 2019, provision for tax = $386 million , income earned before tax = $1,751

$\therefore$ Tax rate = ($386 / $1,751) X 100 = 22.04%

Therefore, tax rate in 2019 =22.04%

f) Return on assets for 2019

Return on assets = (Net income / total assets) X 100

In 2019, Net income = $1,363 million , Total assets = $40,963 million

$\therefore$ Return of assets = ($1,363/ $40,963) X 100 = 3.327%

g) Net margin for 2018

Net margin = (net income / sales) X 100

In 2018, net income = $259 million , total sales = $129,628 million

$\therefore$ net margin = ($259 / $129,628) X 100 = 0.2%

Therefore, net margin in 2018 is 0.2%