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	$	24,106			$	24,700			Accounts payable	$	23,784			$	27,700
Accounts receivable		13,048				15,800			Notes payable		16,000				11,400
Inventory		26,342				27,700			Other		12,171				15,900
Total	$	63,496			$	68,200			Total	$	51,955			$	55,000
									Long-term debt	$	75,000			$	90,000
									Owners’ equity
									Common stock and paid-in surplus	$	45,000			$	45,000
									Accumulated retained earnings		222,236				242,000
Fixed assets
Net plant and equipment	$	330,695			$	363,800			Total	$	267,236			$	287,000
Total assets	$	394,191			$	432,000			Total liabilities and owners’ equity	$	394,191			$	432,000

SMOLIRA GOLF CORP. 2015 Income Statement
Sales					$	367,234
Cost of goods sold						235,500
Depreciation						38,600
Earnings before interest and taxes					$	93,134
Interest paid						14,900
Taxable income					$	78,234
Taxes (30%)						23,470
Net income					$	54,764
Dividends	$	35,000
Retained earnings		19,764

   

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 Asset / Current Liabilities
Current Ratio = $63,496 / $51,955
Current Ratio = 1.22

For 2015:

Current Ratio = Current Asset / Current Liabilities
Current Ratio = $68,200 / $55,000
Current Ratio = 1.24

Answer of Part b:

For 2014:

Quick Ratio = (Current Assets – Inventory) / Current Liabilities
Quick Ratio = ($63,496 - $26,342) / $51,955
Quick Ratio = $37,154 / $51,955
Quick Ratio = 0.72

For 2015:

Quick Ratio = (Current Assets – Inventory) / Current Liabilities
Quick Ratio = ($68,200 - $27,700) / $55,000
Quick Ratio = $40,500 / $55,000
Quick Ratio = 0.74

Answer of Part c:

For 2014:

Cash Ratio = Cash / Current Liabilities
Cash Ratio = $24,106 / $51,955
Cash Ratio = 0.46

For 2015:

Cash Ratio = Cash / Current Liabilities
Cash Ratio = $24,700 / $55,000
Cash Ratio = 0.45

Answer of Part d:

For 2015:

Average Total Assets = (Beginning Total Assets + Ending Total Asset) /2
Average Total Assets = ($394,191 + $432,000) /2
Average Total Assets = $413,095.5

Total Asset Turnover = Sales / Average Total Assets
Total Assets Turnover = $367,234 / $413,095.5
Total Assets Turnover = 0.89

Answer of Part e:

Average Inventory = (beginning Inventory + Ending Inventory) /2
Average Inventory = ($26,342 + $27,700) /2
Average Inventory = $27,021

Inventory Turnover = Cost of Goods Sold / Average Inventory
Inventory Turnover = $235,500 / $27,021
Inventory Turnover = 8.72 times