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Some recent financial statements for Smolira Golf Corp. follow.    SMOLIRA GOLF CORP. 2014 and 2015...

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 %

Solutions

Expert Solution

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



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