In: Accounting
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 |
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% | ||