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Saved Help Save & Exit Su Selected current year-end financial statements of Cabot Corporation follow. (All sales were on credit, selected balance sheet amounts at December 31 of the prior year were inventory, $49,900 total assets. $209,400, common stock, 587000, and retained earnings, $34.772) CABOT CORPORATION Income Statement For Current Year Ended December 31 Sales $ 447,600 Cost of goods sold 297,850 Gross profit 149,750 Operating expenses 99,320 Interest expense 4,100 Income before taxes 46,35e Income tax expense 18,672 Net Income $ 27,678 Assets Cash Short-tere investments Accounts receivable, net Merchandise inventory Prepaid expenses Plant assets, net Total assets CABOT CORPORATION Balance Sheet December 31 Liabilities and Equity $ 10,ce Accounts payable 8,000 Acered wages payable 32,000 Income taxes payable 36,150 Long-tere note payable, secured by mortgage on plant assets 3,100 Comon stock 153,300 Retained earnings $ 243,550 Total tilities and equity 3.00 3,00 87.000 5242,550 Required: Compute the following (1) current ratio, (2) acid-test ratio (3) days' sales uncollected, 14) inventory turnover (5) days' sales in inventory < Prey 7 of 28 Next > 5. 6 8. 9 o E R T С O P S D G H K. X С V B N M U

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No. Numerator Denominator Days 1 Current Assets Current Liabilities 89250 23700 2 Quick Assets Current Liabilities 53100 23700 3 Accounts Receivable Credit Sales 32000 447600 365 = 4 Cost of Goods Sold Average Inventory 297850 43025 5 Ending Inventoy Cost of Goods Sold 361501 297850 365= 6 Total Liabilities Shareholders Equity 93100 149450 7 Eanings Before Interest & Taxes Interest Expense 504501 4100 8 Net Income Net Sales 27678) 447600 9 Net Sales Average Total Assets 447600 225975 10 Eanings Before Interest & Taxes Average Total Assets 50450 225975 11 Net Income Average Common Stock 27678 87000 = Current Ratio 3.77 to 1 Acid Test Ratio 2.24 to 1 Days Sales Uncollected 26.09 days Inventory Turnover 6.92 times Days Sales in Inventory 44.30 days Debt-to-Equity Ratio 0.62 to 1 Times Interest Earned 12.30 times Profit Margin Ratio 6.18% Total Asset Turnover 1.98 times Return on Total Assets 22.33% Return on Common Stockholders Equity 31.81% 11 11

Workings Notes Current Assets Cash + Short term investments + Accounts receivable + Merchandise Inventory + Prepaid Expenses = 10000 + 8000 + 32000 + 36150 + 3100 = 89250 Current Liabilities Accounts Payable + Accrued Wages Payable + Income Taxes Payable = 16500 + 3400 + 3800 = 23700 Current Assets - Merchandise Inventory = 89250 - 36150 = 53100 Quick Assets Average Inventory (Opening Inventory + Closing Inventory)/2 = (49900+36150)/2 = 43025 EBIT Shareholder's Equity Net Income + Interest Expense + Income Tax Expense = 27678 +4100+ 18672 50450 Common Stock + Retained Eanings = 87000 + 62450 = 149450 (Total Assets at Beginning + Total Assets at the end)/2 = (209400 + 242550)/2 = 225975 (CommonStock at beginning + Common stock at end)/2 = (87000+87000)/2 = 87000 Avg Total Assets Avg Common Stock