Question

Some recent financial statements for Smolira Golf Corp. follow.

  

SMOLIRA GOLF CORP. 2014 and 2015 Balance Sheets
Assets									Liabilities and Owners’ Equity
	2014				2015					2014				2015
Current assets									Current liabilities
Cash	$	23,066			$	25,300			Accounts payable	$	24,384			$	28,300
Accounts receivable		13,648				16,400			Notes payable		14,000				12,000
Inventory		27,152				28,300			Other		12,771				19,700
Total	$	63,866			$	70,000			Total	$	51,155			$	60,000
									Long-term debt	$	81,000			$	90,000
									Owners’ equity
									Common stock and paid-in surplus	$	55,000			$	55,000
									Accumulated retained earnings		213,406				229,000
Fixed assets
Net plant and equipment	$	336,695			$	364,000			Total	$	268,406			$	284,000
Total assets	$	400,561			$	434,000			Total liabilities and owners’ equity	$	400,561			$	434,000

SMOLIRA GOLF CORP. 2015 Income Statement
Sales					$	333,706
Cost of goods sold						215,200
Depreciation						49,300
Earnings before interest and taxes					$	69,206
Interest paid						15,500
Taxable income					$	53,706
Taxes (30%)						16,112
Net income					$	37,594
Dividends	$	22,000
Retained earnings		15,594

Find the following financial ratios for Smolira Golf Corp. (use year-end figures rather than average values where appropriate): (Enter your profitability ratio answers as a percent rounded to 2 decimal places, e.g., 32.16. Round the remaining answers to 2 decimal places, e.g., 32.16.)

  

Short-term solvency ratios:		2014	2015
a.	Current ratio	times	times
b.	Quick ratio	times	times
c.	Cash ratio	times	times

  

Asset utilization ratios:
d.	Total asset turnover	times
e.	Inventory turnover	times
f.	Receivables turnover	times

  

Long-term solvency ratios:		2014	2015
g.	Total debt ratio	times	times
h.	Debt–equity ratio	times	times
i.	Equity multiplier	times	times

  

j.	Times interest earned	times
k.	Cash coverage ratio	times

  

Profitability ratios:
I.	Profit margin	%
m.	Return on assets	%
n.	Return on equity	%

Answer 1

Answer of Part a:

For 2014:

Current Ratio = Current Assets / Current Liabilities
Current Ratio = $63,866 / $51,155
Current Ratio = 1.25:1

For 2015:

Current Ratio = Current Assets / Current Liabilities
Current Ratio = $70,000 / $60,000
Current Ratio = 1.17:1

Answer of Part b:

For 2014:

Quick Ratio = (Current Assets – Inventory) / Current Liabilities
Quick Ratio = ($63,866 - $27,152) / $51,155
Quick Ratio = $36,714 / $51,155
Quick Ratio = 0.72:1

For 2015:

Quick Ratio = (Current Assets – Inventory) / Current Liabilities
Quick Ratio = ($70,000 - $28,300) / $60,000
Quick Ratio = $41,700 / $60,000
Quick Ratio = 0.70:1

Answer of Part c:

For 2014:

Cash Ratio = Cash / Current Liabilities
Cash Ratio = $23,066 / $51,155
Cash Ratio = 0.45:1

For 2015:

Cash Ratio = Cash / Current Liabilities
Cash Ratio = $25,300 /$60,000
Cash Ratio = 0.42:1

Answer of Part d:

Average Total Assets = (Beginning Total Assets + Ending Total Assets) /2
Average Total Assets = ($400,561 + $434,000) /2
Average Total Assets = $417,280.5

Total Asset Turnover = Sales / Average Total Assets
Total Asset Turnover = $333,706 / $417,280.5
Total Asset Turnover = 0.80 times