Question

Problem 13-4A Calculation of financial statement ratios LO P3

Selected year-end financial statements of Cabot Corporation follow. (All sales were on credit; selected balance sheet amounts at December 31, 2016, were inventory, $49,900; total assets, $259,400; common stock, $88,000; and retained earnings, $28,484.)

CABOT CORPORATION
Income Statement
For Year Ended December 31, 2017

Sales $451,600

Cost of goods sold 297,950

Gross profit 153,650

Operating expenses 98,600

Interest expense 4,200

Income before taxes 50,850

Income taxes 20,484

Net income $30,366

CABOT CORPORATION Balance Sheet December 31, 2017
Assets				Liabilities and Equity
Cash	$	16,000		Accounts payable	$	17,500
Short-term investments		8,000		Accrued wages payable		3,600
Accounts receivable, net		29,400		Income taxes payable		4,100
Notes receivable (trade)*		3,000
Merchandise inventory		34,150		Long-term note payable, secured by mortgage on plant assets		71,400
Prepaid expenses		2,600		Common stock		88,000
Plant assets, net		150,300		Retained earnings		58,850
Total assets	$	243,450		Total liabilities and equity	$	243,450

* These are short-term notes receivable 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 intermediate calculations.)

Complete this question by entering your answers in the tabs below.

• Req 1 and 2
• Req 3
• Req 4
• Req 5
• Req 6
• Req 7
• Req 8
• Req 9
• Req 10
• Req 11

Compute the current ratio and acid-test ratio.

	(1) Current Ratio Choose Numerator: / Choose Denominator: = Current Ratio / = Current ratio 2017: / = to 1 (2) Acid-Test Ratio Choose Numerator: / Choose Denominator: = Acid-Test Ratio / = Acid-Test Ratio 2017: / = to 1

Answer 1