Question

In: Accounting

The following financial statements apply to Benson Company: Year 4 Year 3 Revenues Net sales $...

The following financial statements apply to Benson Company:

Year 4 Year 3
Revenues
Net sales $ 211,000 $ 176,600
Other revenues 8,300 6,300
Total revenues 219,300 182,900
Expenses
Cost of goods sold 125,100 101,600
Selling expenses 20,700 18,700
General and administrative expenses 10,500 9,500
Interest expense 1,800 1,800
Income tax expense 19,000 16,600
Total expenses 177,100 148,200
Net income $ 42,200 $ 34,700
Assets
Current assets
Cash $ 4,500 $ 6,800
Marketable securities 3,000 3,000
Accounts receivable 35,700 30,600
Inventories 101,300 94,400
Prepaid expenses 4,800 3,800
Total current assets 149,300 138,600
Plant and equipment (net) 105,100 105,100
Intangibles 20,800 0
Total assets $ 275,200 $ 243,700
Liabilities and Stockholders’ Equity
Liabilities
Current liabilities
Accounts payable $ 38,600 $ 55,200
Other 15,200 15,700
Total current liabilities 53,800 70,900
Bonds payable 64,500 65,500
Total liabilities 118,300 136,400
Stockholders’ equity
Common stock (45,000 shares) 113,600 113,600
Retained earnings 43,300 (6,300 )
Total stockholders’ equity 156,900 107,300
Total liabilities and stockholders’ equity $ 275,200 $ 243,700


Required
Calculate the following ratios for Year 3 and Year 4. Since Year 2 numbers are not presented do not use averages when calculating the ratios for Year 3. Instead, use the number presented on the Year 3 balance sheet.

JUST NEED *****F-N*****

a. Net margin. (Round your answers to 2 decimal places.)
b. Return on investment. (Round your answers to 2 decimal places.)
c. Return on equity. (Round your answers to 2 decimal places.)
d. Earnings per share. (Round your answers to 2 decimal places.)
e. Price-earnings ratio (market prices at the end of Year 3 and Year 4 were $5.96 and $4.80, respectively).(Round your intermediate calculations and final answers to 2 decimal places.)
f. Book value per share of common stock. (Round your answers to 2 decimal places.)
g. Times interest earned. Exclude extraordinary income in the calculation as they cannot be expected to recur and, therefore, will not be available to satisfy future interest payments. (Round your answers to 2 decimal places.)
h. Working capital.
i. Current ratio. (Round your answers to 2 decimal places.)
j. Quick (acid-test) ratio. (Round your answers to 2 decimal places.)
k. Accounts receivable turnover. (Round your answers to 2 decimal places.)
l. Inventory turnover. (Round your answers to 2 decimal places.)
m. Debt-to-equity ratio. (Round your answers to 2 decimal places.)
n. Debt-to-assets ratio. (Round your answers to the nearest whole percent.)

year4 year3
a net margin
b return on investment
c return on equity
d earnings per share
e price earnings ratio
f book value
g interest earned
h working capital
i current ratio
j quick (acid test) ratio
k accounts receivable turnover
l inventory turnover
m debt to equity ratio
n debt to assets ratio

Solutions

Expert Solution

Ans. F Book value per share =   Total stockholder's equity / no. of shares outstanding
Year 4 $156,900 / 45,000 $3.49 per share
Year 3 $107,300 / 45,000 $2.38 per share
Ans. G Time interest earned = Income before interest and taxes / Interest expenses
Year 4 $63,000 / 1,800 35.00 times
Year 3 $53,100 / 1,800 29.50 times
*Calculation of income before interest and taxes:
Year 4 Year 3
Total revenue $219,300 $182,900
Less: expenses
Cost of goods sold -$125,100 -$101,600
Selling expenses -$20,700 -$18,700
General & administrative expenses -$10,500 -$9,500
Income before interest and taxes $63,000 $53,100
Ans. H Working capital =     Total current assets - Total current liabilities
Year 4 $149,300 - $53,800 $95,500
Year 3 $138,600 - $70,900 $67,700
Current ratio   =   Total current assets / Total current liabilities
Year 4 $149,300 /$53,800 2.78 : 1
Year 3 $138,600 / $70,900 1.95 : 1
Ans. i Quick ratio   =   (Total current assets - Inventory - Prepaid expenses) / Total current liabilities
Year 4 ($149,300 - $101,300 - $4,800) /$53,800 0.80 : 1
Year 3 ($138,600 - $94,400 - $3,800) / $70,900 0.57 : 1
Ans. J Accounts receivable turnover ratio   = Net credit sales / Average accounts receivable
Year 4 $211,000 / $33,150 6.37 times
Year 3 $176,600 / $30,600 5.77 times
*Average receivable = (Beginning receivables + Ending receivables) / 2
Year 4 ($30,600 + $35,700) / 2 $33,150
Year 3 $30,600 $30,600
Ans. L Inventory turnover = Cost of goods sold / Average inventory
Year 4 $125,100 / $97,850 1.28 times
Year 3 $101,600 / $94,400 1.08 times
*Average inventory = (Beginning inventory + Ending inventory) / 2
Year 4 ($94,400 + $101,300) / 2 $97,850
Year 3 $94,400 $94,400
Ans. M Debt equity ratio = Total liabilities / Total stockholder's equity
Year 4 $118,300 / $156,900 0.75 : 1
Year 3 $136,400 / $107,300 1.27 : 1
Ans. N Debt to assets ratio =   Total liabilities / Total assets * 100
Year 4 $118,300 / $243,700 * 100 49%
Year 3 $136,400 / $275,200 * 100 50%

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