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McCormick, Inc. 's Comparative Balance Sheet for the YearsEnding December 3 1 : Current Assets:...

McCormick, Inc. 's Comparative Balance Sheet for the Years Ending December 3 1 : Current Assets: 2018 2019 Cash $ 10 16 26 Inventory 22 10 Total current assets $ 40 $46 Gross Fixed Assets: Less accumulated depreciation 120 154 Net fixed assets 60 90 Total Assets Current Liabilities: $100 $136 $ 16 $ 18 NIP 10 10 Total current liabilities 26 28 Long term debt 20 28 Total Liabilities Owners' equity: S 46 s 56 Common stock 40 50 Retained earnings 14 30 Total Liabilities & Owners' Equity Sloo $136 McCormick, Inc. had net income of $26 million for 2019 and paid total cash dividends of $20 million to their common stockholders. Please calculate the following for 2019: A) Current ratio: B) Acid test ratio: C) Debt ratio: D) Return on total assets: E) Return on Common Equity:

Solutions

Expert Solution

A. Current ratio is computed as follows:

= Total current asset / Total current liabilities

= $ 46 / $ 28

= 1.64 Approximately

B. Quick ratio is computed as follows:

= (Total current assets - Inventory) / Total current liabilities

= ($ 46 - $ 10) / $ 28

= $ 36 / $ 28

= 1.29 Approximately

C. Debt ratio is computed as follows:

= (Total current liabilities + Long term debt) / Total Assets

= ($ 28 + $ 28) / $ 136

= $ 56 / $ 136

= 0.41 Approximately

D. Return on total assets is computed as follows:

= Net Income / Total Assets

= $ 26 million / $ 136 million

= 0.19 Approximately

E. Return on common equity is computed as follows:

= Net Income / (Common stock + Retained earnings)

= $ 26 million / ($ 50 million + $ 30 million)

= $ 26 million / $ 80 million

= 0.325 Approximately

jeff jeffy answered 2 years ago
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