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. S47.900; total assets, $259.400: common stock. $89.000, and retained earnings $34455 CABOT CORPORATION Income Statement To Year Ended December 31, 2017 Sales $ 454,600 cost of goods sold 297,950 Gross profit 156,65e Operating expenses 98,700 Interest expense 4.700 Income before taxes 53,250 Income taxes 21,451 Net income 31,799 5 $ CABOT CORPORATION Balance Sheet December 31, 2017 Liabilities and Equity $ 12,000 Accounts payable 8.400 Accrued wages payable 3520 Takes payable 40,150 Long tere nate payable, secured by mortgage on plant assets 2,50 Common stock 1 Retained menings 5 245,059 Total Tibilities wity Assets Cash Short-term Investments Accounts receivable, net Notes receivable (trade) Merchandise Inventory Prepaid expenses Plant assets, net Total assets 4,600 3,300 66,250 240.050 These are short-term notes receivable arising from customer de sales Required: Compute the following. (1) current ratio, (2) acid test ratio (3) days sales cincollected 14 inventory turnover (5) says sales in Inventory. (6) debt-to-equity ratio (7) times interest earned 18 profit margin ratio. 191 total asset turnover (10) return on total assets, and (11) return on common stockholders equity (Do not found intermediate calculations.) Complete this question by entering your answers in the tabs below. Reg 1 and 2 Reg 3 Reg4 Regs Reas Reg? Rega Reg 9 Reg 10 Reg 11 Compute the days' sales in inventory. (5) Choose Numerator: Days' Sales in Inventory 1 Choose Denominator 1 Days Sales In Inventory Days sales in Inventory days 2017: < Rey Req>

Answer 1

(5) Days sales in inventory = Average Inventory / Cost of Goods Sold x 365
= 44025 / 297950 x 365 = 53.93 days
Average Inventory = (47900+40150) / 2 = $44025

(6) Debt to Equity Ratio = Total Liabilities / Total Equity
= $92800 / 155250 = 0.60
Total Liabilities = $17500+4600+3300+67400 = $92800
Total Equity = $89000+66250 = $155250

(7) Times Interest Earned = (Income before taxes + Interest Expense) / Interest Expense
= ($53250+4700) / 4700 = 12.33 times

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