Question

Long-term debt ratio	0.4
Times interest earned	8.0
Current ratio	1.4
Quick ratio	1.0
Cash ratio	0.2
Inventory turnover	5.0
Average collection period	73	days

Use the above information from the tables to work out the following missing entries, and then calculate the company’s return on equity. Note: Turnover and the average collection period are calculated using start-of-year, not average, values. (Enter your answers in millions. Round intermediate calculations and final answers to 2 decimal places.)

	INCOME STATEMENT (Figures in $ millions) Net sales Cost of goods sold Selling, general, and administrative expenses 10.00 Depreciation 20.00 Earnings before interest and taxes (EBIT) Interest expense Income before tax Tax (35% of income before tax) Net income

BALANCE SHEET (Figures in $ millions) This Year Last Year Assets Cash and marketable securities $20 Accounts receivable 34 Inventories 26 Total current assets $80 Net property, plant, and equipment 25 Total assets $105 Liabilities and shareholders’ equity Accounts payable $25.00 $20 Notes payable 30.00 35 Total current liabilities $55 Long-term debt 20 Shareholders’ equity 30 Total liabilities and shareholders’ equity $115.00 $105

Answer 1

The answer has been presented in the supporting sheet. All the parts has been solved with detailed explanation and format. For detailed answer refer to the supporting sheet.