Question

Some recent financial statements for Smolira Golf, Inc., follow. SMOLIRA GOLF, INC. Balance Sheets as of December 31, 2015 and 2016 2015 2016 2015 2016 Assets Liabilities and Owners’ Equity Current assets Current liabilities Cash $ 3,251 $ 3,407 Accounts payable $ 2,143 $ 2,580 Accounts receivable 4,777 5,801 Notes payable 1,740 2,096 Inventory 12,438 13,802 Other 88 105 Total $ 20,466 $ 23,010 Total $ 3,971 $ 4,781 Long-term debt $ 13,600 $ 16,360 Owners’ equity Common stock and paid-in surplus $ 37,000 $ 37,000 Fixed assets Accumulated retained earnings 15,644 38,966 Net plant and equipment $ 49,749 $ 74,097 Total $ 52,644 $ 75,966 Total assets $ 70,215 $ 97,107 Total liabilities and owners’ equity $ 70,215 $ 97,107 SMOLIRA GOLF, INC. 2016 Income Statement Sales $ 186,970 Cost of goods sold 126,003 Depreciation 5,353 EBIT $ 55,614 Interest paid 1,450 Taxable income $ 54,164 Taxes 18,957 Net income $ 35,207 Dividends $ 11,885 Retained earnings 23,322 Find the following financial ratios for Smolira Golf (use year-end figures rather than average values where appropriate): (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16. Enter the profitability ratios as a percent.) 2015 2016 Short-term solvency ratios 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 g. Total debt ratio times times h. Debt−equity ratio times times i. Equity multiplier times times j. Times interest earned ratio times k. Cash coverage ratio times Profitability ratios l. Profit margin % m. Return on assets % n. Return on equity %

Answer 1

ASSETS	2016	2015
Current assets:
Cash	3251	3407
Accouns receivable	4777	5801
Inventory	12438	13802
Total current assets	20466	23010
Fixed assets:
Net plant and equipment	49749	74097
Total assets	70215	97107
LIABILITIES & OWNERS' EQUITY
Current liabilities:
Accounts payable	2143	2580
Other	88	105
Notes payable	1740	2096
	3971	4781
Long term debt	13600	16360
Total debt	17571	21141
Owners' equity:
Common stock and paid in surplus	37000	37000
Accumulated earnings	15644	38966
Total owners' equity	52644	75966
Total liabilities and owners' equity	70215	97107
Current ratio = Current assets/Current liabilities =	5.15	4.81
	(20466/3971)	(23010/4781)
Quick ratio = (Cash+Accounts receivable)/Current liabilities =	2.02	1.93
	(3251+4777)/3971))	(3407+5801)/4781))
Cash ratio = (Cash+marketable securities)/Current liabilities	0.82	0.71
	(3251/3971)	(3407/4781)
Total asset turnover = Sales/Average total assets = 186970/((70215+97107)/2)) =	2.23
Inventory turnover = Cost of goods sold/Average inventory = 126003/((12438+13802)/2)) =	9.60
Receivables turnover = Sales/Average receivables = 186970/((4777+5801)/2)) =	35.35
Total debt ratio = Total debt/Total assets	0.25	0.22
Debt equity ratio = Total debt/Total equity	0.33	0.28
Equity multiplier =Total assets/Total equity	1.33	1.28
Times interest earned = EBIT/Interest expense = 55614/1450 =	38.35
Cash coverage ratio = (EBIT+Depreciation)/Interest expense = (55614+5353)/1450 =	42.05
Profit margin = Net income/Sales = 35207/186970 =	18.83%
Return on assets = Net income/Average assets = 35207/((70215+97107)/2)) =	42.08%
Return on equity = Net income/Average equity = 35207/((52644+75966))/2) =	54.75%