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, $48,900: total assets, $189.400; common stock, $90,000: and retained earnings, $22748.) CABOT CORPORATION Income Statement For Year Ended Decenber 31, 2017 ts Sales Cost of goods sold Gross profit Operating expenses Interest expense Income before taxes Income tares Net income $448, 600 297, 250 151, 350 98, 600 4, 100 48, 650 19, 598 $ 29, 052 Book Ask CABOT CORPORATION Balance Sheet December 31, 2017 Liabilities and Equity Assets Cash Short-term investnents Accounts receivable, net otes revable (trade)x Mer chandise inventory $ 17, 500 3, 200 3, 300 10.000 Accounts payable 8, 400 Accrued ages payable 29, 200 Income taxes payable 4, 500 32, 150 Long tern note payable, secured 63, 400 by mortgage on plant assets Prepaid expenses Plant assets, net Total assets 2, 650 Conmon stock 90, 000 62, 800 $240, 200 Retained earnings Total liabilities and equi ty 153, 300 $240, 200 These are short-term notes recelvable arising from customer (trade) sales. Required: Compute the following: (1) current ratio. (2) acid-test ratio, (3) days sales uncollected. (4) inventory turnover, (5) days' sales in inventory (6) debt-to-equity ratio, (7) times interest earned, (8) profit margin ratio, (9) total asset turnover, (10) return on total assets, and (11) return on common stockholders equity. (Do not round Intermedlate calculations.) Complete this question by entering your answers in the tabs below Req 3Req 4Req 5 Req 6 Req 7 Req 8 Req 9 Req 10 Req 11 Compute the return on common stockholders' equity er Return On Common Stockholders Return On Common Stockholders Choose Numerator: Choose Denominator 2017 KReg 10 Req 11 Complete this question by entering your answers in the tabs below Req 3 Req 4 Req 5 Req 6 Req 7 Req 8 Req 9Req 10 Req 11 Compute the current ratio and acid-test ratio. Choose Numerator: Choose Denominator: = Current Ratio Current Ratio to 1 2017 Choose Numerator: Choose Denominator: Acid-Test Ratio Acid-Test Ratio to 1 2017 Compute the days sales uncollected. Davs' Sales Uncollected Choose Numerator: Choose Denominator: Days Sales Uncollected x Days Days Sales Uncollected 2017 days Req 1 and 2 Req 4 > Inventory Turnover Choose Denominator: Choose Numerator: Inventory Turnover Inventory Turnover 2017 times く Req 3 Req5 > Compute the days' sales in inventory. Days' Sales in Inventory Choose Denominator: xDaysDays' Sales in Choose Numerator:/ Days' Sales in Inventory 2017 days K Req4 Req 6> Debt-to-Equity Ratio Choose Choose Numerator: - Debt-to-Equity Ratio - Debt-to-Equity Ratio Denominator to 1 2017 K Req 5 Req7> Compute the times interest earned Choose Denominator: Times Interest = Earned Choose Numerator: Times interest earned 2017 times Compute the profit margin ratio. Choose Numerator: Choose Denominator: Profit margin ratio Profit margin ratio 2017: 〈Req7 Req 9 〉 Compute the total asset turnover. Total Asset Turnover Total Asset Choose Numerator: Choose Denominator: Turnover Total Asset Turnover 2017 times 〈 Req 8 Req 10 〉 Compute the returh on total assets. Return on Total Assets (10) Return on Total se Numerator:/ Choose Denominator: Assets Return on Total Assets 2017 〈 Req 9 Req 11 〉 Compute the return on common stockholders' equity Return On Common Stockholders' Equity Choose Numerator: Choose Denominator Return On Common Stockholders Equi 2017 〈 Req 10 Reg 11>

Answer 1

Ans.	Balance sheet
	Assets	20Y7	Liabilities & Equity	20Y7
	Cash	$10,000	Accounts payable	$17,500
	Short - term investments	$8,400	Accrued wages payable	$3,200
	Accounts receivables	$29,200	Income tax payable	$3,300
	Notes receivables	$4,500	Current liabilities	$24,000
	Merchandise inventory	$32,150	Long term Notes payable	$63,400
	Prepaid expenses	$2,650
	Total current assets (a)	$86,900	Total liabilities (a)	$87,400
	Plant assets net	$153,300	Common stock	$90,000
	Total fixed assets (b)	$153,300	Retained earnings	62800
			Total Equity (b)	$152,800
	Total assets (a+b)	$240,200	Total liabilities and Equity (a + b)	$240,200
Ans. 1	Current ratio   =   Total current assets / Total current liabilities
	$86,900 / $24,000
	3.62 : 1
Ans. 2	Acid test ratio   =   (Total current assets - Inventory - Prepaid expenses) / Total current liabilities
	($86,900 - $32,150 - $2,650) / $24,000
	$52,100 / $24,000
	2.17 : 1
Ans. 3	Days sales uncollected = (Accounts receivables + Notes receivables) / Net credit sales * No. of days in year
	($29,200 + $4,500) / $448,600 * 365
	$33,700 / $448,600 * 365
	27.42	days
Ans. 4	Inventory turnover = Cost of goods sold / Average Inventory
	$297,250 / $40,525
	7.33	times
	*Average inventory = (Beginning inventory + Ending inventory) / 2
	($48,900 + $32,150) / 2
	$40,525
Ans. 5	Days sales in inventory = Ending inventory / Cost of goods sold * No. of days in year
	$32,150 / $297,250 * 365
	39.48	days
Ans. 6	Debt to equity ratio   =   Total liabilities / Total stockholder's equity
	$87,400 / $152,800
	0.57 : 1
Ans. 7	Time interest earned =(Income before taxes + Interest expenses) / Interest expenses
	($48,650 + $4,100) / $4,100
	$52,750 / $4,100
	12.87	times
Ans. 8	Profit Margin =   Net income / Sales * 100
	$29,052 / $448,600 * 100
	6.48%
Ans. 9	Total assets turnover = Sales / Average operating assets
	$448,600 / $214,800
	2.09	times
	*Average assets = (Beginning assets + Ending assets) / 2
	($189,400 + $240,200) / 2
	$214,800
Ans. 10	Return on investment (ROI) =   Net income / Average assets * 100
	$29,052 / $214,800 * 100
	13.53%
Ans. 11	Return on Common stockholder's equity =   Net income / Average Common stockholder's equity * 100
	$29,052 / $132,774 * 100
	21.88%
	*Beginning equity = Beginning common stock + Beginning retained earnings
	$90,000 + $22,748
	$112,748
	* Average Stockholder's equity =   (Beginning equity + Ending equity) / 2
	($112,748 + $152,800) / 2
	$132,774