Question

Using the financial statements for the Snider Corporation, calculate the 13 basic ratios found in the chapter.   
   

SNIDER CORPORATION Balance Sheet December 31, 20X1
Assets
Current assets:
Cash		$	53,000
Marketable securities			26,400
Accounts receivable (net)			235,000
Inventory			257,000
Total current assets		$	571,400
Investments			65,100
Plant and equipment.	$699,000
Less: Accumulated depreciation	222,000
Net plant and equipment			477,000
Total assets		$	1,113,500
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable		$	94,200
Notes payable			70,600
Accrued taxes			14,000
Total current liabilities		$	178,800
Long-term liabilities:
Bonds payable			158,800
Total liabilities		$	337,600
Stockholders' equity
Preferred stock, $50 par value		$	100,000
Common stock, $1 par value			80,000
Capital paid in excess of par			190,000
Retained earnings			405,900
Total stockholders' equity		$	775,900
Total liabilities and stockholders' equity		$	1,113,500

    

SNIDER CORPORATION Income Statement For the Year Ending December 31, 20X1
Sales (on credit)	$	2,016,000
Cost of goods sold		1,319,000
Gross profit	$	697,000
Selling and administrative expenses		552,000	*
Operating profit (EBIT)	$	145,000
Interest expense		30,300
Earnings before taxes (EBT)	$	114,700
Taxes		89,800
Earnings after taxes (EAT)	$	24,900

*Includes $37,300 in lease payments.

Using the above financial statements for the Snider Corporation, calculate the following ratios.

a. Profitability ratios. (Do not round intermediate calculations. Input your answers as a percent rounded to 2 decimal places.)
  

	Profitability Ratios Profit margin % Return on assets (investment) % Return on equity %

b. Assets utilization ratios. (Do not round intermediate calculations. Round your answers to 2 decimal places.)
   

	Assets Utilization Ratios Receivable turnover times Average collection period days Inventory turnover times Fixed asset turnover times Total asset turnover times

c. Liquidity ratios. (Do not round intermediate calculations. Round your answers to 2 decimal places.)
  

  

	Liquidity Ratios Current ratio times Quick ratio times

d. Debt utilization ratios. (Do not round intermediate calculations. Input your debt to total assets answer as a percent rounded to 2 decimal places. Round your other answers to 2 decimal places.)
  

	Debt Utilization Ratios Debt to total assets % Times interest earned times Fixed charge coverage times

Answer 1

a	Profitability ratios
1	Profit Margin
	Net Income	$24,900
	Total Revenue	$2,016,000
	Profit Margin (net income/total revenue)	1.24%
2	Return on assets
	Return on assets = Net income/Average assets
	As, we don’t have beginning value of assets, we will use total assets instead of average assets
	Net income	$24,900
	Total assets	$1,113,500
	Return on assets	2.24%
3	Return on equity
	Return on Equity = Net income/Shareholder's Equity
	Net Income	$24,900
	Paid in Capital, Common Stock	$80,000
	Paid in Capital, Preferred Stock	$100,000
	Paid in capital in excess of par	$190,000
	Retained Earnings	$405,900
	Total Equity	$775,900
	Return on equity (145200/1289840)	3.21%
b	Assets Utilization ratios
1	Receivable Turnover
	Accounts receivable turnover ratio = Net Credit sales/Average accounts receivable
	As we don’t have figure for beginning accounts receivable, we will use total receivables
	Sales (all credit)	$2,016,000
	Total accounts receivables	$235,000
	Accounts receivable turnover ratio	8.58	times
2	Average collection period
	Average collection period = Days in the year/Account receivable turnover ratio
	Days in the year	365
	Accounts receivable turnover ratio	8.58
	Average collection period	42.5	days
3	Inventory Turnover
	Inventory Turnover ratio = Cost of goods sold/Average inventory
	Cost of goods sold	$1,319,000
	Total Inventory	$257,000
	Inventory Turnover ratio	5.13	times
4	Fixed Assets Turnover
	Fixed Assets Turnover = Net sales/(Fixed assets-Accumulated Depreciation)
	Net Sales	$2,016,000
	Fixed Assets	$699,000
	Less: Accumulated Depreciation	$222,000
	Net Fixed Assets	$477,000
	Fixed Assets Turnover	4.23	times
5	Total Assets Turnover
	Total assets Turnover = Net Sales/Total Assets
	Net Sales	$2,016,000
	Total Assets	$1,113,500
	Total assets Turnover (2486000/1681000)	1.81	Times
c	Liquidity ratios
1	Current Ratio
	Current ratio= Current Assets/Current liabilities
	Current Assets	$571,400
	Current Liabilities	$178,800
	Current Ratio	3.20	times
2	Quick Ratio
	Quick ratio = (Current Assets-Inventory)/Current liabilities
	Current Assets	$571,400
	Less: Inventory	$257,000
	Quick Assets	$314,400
	Current Liabilities	$178,800
	Acid test Ratio	1.76	times
d	Debt Utilization ratios
1	Debt to total assets
	Debt to Assets Ratio = Total debt / Total Assets
	Current Liabilities	$178,800
	Long term Liabilities	$158,800
	Total Debt	$337,600
	Total Assets	$1,113,500
	Debt to Asset Ratio (436900/3556900)	30.32%
2	Times Interest earned
	Times interest earned ratio = EBIT/Interest expense
	Earnings before interest and Tax (EBIT)	$145,000
	Interest expense	$30,300
	Times interest earned ratio	4.79	times
3	Fixed Charges coverage
	Fixed Charges coverage = (EBIT+Fixed charges before tax)/Fixed charges before tax+Interest
	EBIT	$145,000
	Fixed Charges (lease payment)	$37,300
	Total	$182,300
	Interest expenses	$30,300
	Fixed charges	$37,300
	Total	$67,600
	Fixed charges coverage	2.70	times