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	$	24,096			$	24,600			Accounts payable	$	23,684			$	27,600
Accounts receivable		12,948				15,700			Notes payable		14,000				11,300
Inventory		26,242				27,600			Other		12,071				18,100
Total	$	63,286			$	67,900			Total	$	49,755			$	57,000
									Long-term debt	$	74,000			$	82,000
									Owners’ equity
									Common stock and paid-in surplus	$	48,000			$	48,000
									Accumulated retained earnings		221,226				242,000
Fixed assets
Net plant and equipment	$	329,695			$	361,100			Total	$	269,226			$	290,000
Total assets	$	392,981			$	429,000			Total liabilities and owners’ equity	$	392,981			$	429,000

SMOLIRA GOLF CORP. 2015 Income Statement
Sales					$	414,290
Cost of goods sold						265,500
Depreciation						57,700
Earnings before interest and taxes					$	91,090
Interest paid						14,800
Taxable income					$	76,290
Taxes (40%)						30,516
Net income					$	45,774
Dividends	$	25,000
Retained earnings		20,774

   

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 = $63,286 / $49,755
Current ratio = 1.27:1

For 2015:

Current Ratio = Current Assets / Current Liabilities
Current Ratio = $67,900 / $57,000
Current ratio = 1.19:1

Answer of Part b:

For 2014:

Quick Ratio = (Current Assets –Inventory) / Current Liabilities
Quick Ratio = ($63,286 - $26,242) / $49,755
Quick Ratio = $37,044 / $49,755
Quick Ratio = 0.74:1

For 2015:

Quick Ratio = (Current Assets –Inventory) / Current Liabilities
Quick Ratio = ($67,900 - $27,600) / $57,000
Quick Ratio = $40,300 / $57,000
Quick Ratio = 0.71:1

Answer of Part c:

For 2014:

Cash Ratio = Cash / Current Liabilities
Cash Ratio = $24,096 / $49,755
Cash Ratio = 0.48:1

For 2015:

Cash Ratio = Cash / Current Liabilities
Cash Ratio = $24,600 / $57,000
Cash Ratio = 0.43:1

Answer of Part d:

Total Assets Turnover = Sales / Total Asset
Total Asset Turnover = $414,290 / $429,000
Total Asset Turnover = 0.97 times

Answer of Part e:

Inventory Turnover = COGS / Inventory
Inventory Turnover = $265,500 / $27,600
Inventory Turnover = 9.62 times