The financial statements of Sol Company appear below: Sol COMPANY Comparative Statements of Financial Position December...
The financial statements of Sol Company appear below:
Sol COMPANY
Comparative Statements of Financial Position
December 31, 2017
————————————————————————————————————————
Assets 2017 2016
Property, plant and equipment (net).................................................. $260,000 $300,000
Inventory............................................................................................ 50,000 70,000
Accounts receivable (net).................................................................. 50,000 30,000
Short-term investments..................................................................... 15,000 60,000
Cash................................................................................................... 25,000 40,000
Total assets ................................................................................ $400,000 $500,000
Equity and liabilities
Share capital – ordinary.................................................................... $150,000 $150,000
Retained earnings.............................................................................. 110,000 70,000
Bonds payable................................................................................... 80,000 160,000
Accounts payable.............................................................................. 20,000 30,000
Short-term notes payable.................................................................. 40,000 90,000
Total equity and liabilities ........................................................... $400,000 $500,000
GROGAN COMPANY
Income Statement
For the Year Ended December 31, 2017
Net sales............................................................................................ $400,000
Cost of goods sold............................................................................. 240,000
Gross profit........................................................................................ 160,000
Operating expenses........................................................................... 42,000
Income from operations..................................................................... 118,000
Interest expense................................................................................ 18,000
Income before income taxes............................................................. 100,000
Income tax expense.......................................................................... 30,000
Net income........................................................................................ $ 70,000
Additional information:
a. Cash dividends of $23,000 were declared and paid in 2017.
b. Weighted-average number of ordinary shares outstanding during 2017 was 30,000 shares.
c. Market value of ordinary shares on December 31, 2017, was $21 per share.
Instructions
Using the financial statements and additional information, compute the following ratios for Grogan Company for 2017. Show all computations.
1. Current ratio _________.
2. Return on ordinary shareholders' equity _________.
3. Price-earnings ratio _________.
4. Acid-test ratio _________.
5. Accounts receivable turnover _________.
6. Times interest earned _________.
7. Profit margin _________.
8. Days in inventory _________.
9. Payout ratio _________.
10. Return on assets _________.
Homework Answers
1. Current Ratio = 140000/50000 = 2.8
2. Return on Common Stockholders' = 70000/(260000+220000)/2 =29.17%
3.Price Earning Ratio = EPS =70000/30000 = 2.33
21/2.33 = 9 Times
4.Acid-Test Ratio =90000/50000 = 1.8
5.Receivable Turnover = 400000/(50000+30000)/2 =10 Times
6.Times Interest Earned = (70000+30000+18000)/18000 = 6.56 Times
7. Profit Margin = 70000/400000 =17.5%
8.Days in Inventory = 60,000/240,000 x 365
=91.3 Days
9. Payout Ratio = 23,000/70,000 = 32.9%
10. Return on assets = 70,000/(400,000 + 500,000)/2 = 15.56%
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The financial statements of Sol Company appear below: Sol COMPANY Comparative Statements of Financial Position December...
The financial statements of Sol Company appear below: Sol COMPANY Comparative Statements of Financial Position December...
The financial statements of Sol Company appear below: Sol COMPANY Comparative Statements of Financial Position December 31, 2017 ———————————————————————————————————————— Assets 2017 2016 Property, plant and equipment (net).................................................. $260,000 $300,000 Inventory............................................................................................ 50,000 70,000 Accounts receivable (net).................................................................. 50,000 30,000 Short-term investments..................................................................... 15,000 60,000 Cash................................................................................................... 25,000 40,000 Total assets ................................................................................ $400,000 $500,000 Equity and liabilities Share capital – ordinary.................................................................... $150,000 $150,000 Retained earnings.............................................................................. 110,000 70,000 Bonds payable................................................................................... 80,000 160,000...
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