Question

Here are simplified financial statements for Phone Corporation in a recent year: INCOME STATEMENT (Figures in $ millions) Net sales Cost of goods sold Other expenses Depreciation Earnings before interest and taxes (EBIT) Interest expense Income before tax Taxes (at 30%) Net income Dividends $ 14,100 4,560 4,217 2,818 $ 2,505 735 $ 1,770 531 $ 1,239 $ 976

Answer 1

a)
	Average Stockholders Equity = (beginning Stockholders Equity + ending Stockholders Equity)/2
	= ( $12724+11121)/2
	= $ 11922.5
	Return On Stockholders Equity = Net Income / Average Stockholders Equity
	= $1239/11922.5
	=10.39 %
b)	Average Assets = (beginning Assets + ending Assets)/2
	= ( $28524+28013)/2
	= $ 28268.5
	Return On Assets = Net Income / Average Assets
	= $1239/28268.5
	=4.38 %
c)	Capital =Shareholders Equity + Long Term Liabilities
	Average Capital = (beginning capital + ending capital)/2
	=[(4528+6278+12724)+(5043+6249+1121)]/2
	=$17971.5
	Return On Capital = EBIT / Average Capital
	= $2505/17971.5
	13.94%
d)	Inventory Turnover Ratio = Cost of goods sold / inventory
	= $4560/288
	=15.83 times
	Days sales in inventory = 365/ inventory turnover ratio
	= 365 days /15.83
	=23.05 days
e)	Inventory Turnover Ratio = Cost of goods sold / inventory
	= $4560/288
	=15.83 times
f)
	Account Receivables Turnover Ratio = Sales / Account Receivables
		=$14100/2690
		=5.24164
	Average Collection Period = 365/ Account Receivables turnover ratio
	= 365 days /5.24164
	=69.63 days
g)
	Operating Margin = EBIT/ Sales
	= $2505/14100
	=17.77 %