Question

The comparative statements of Crane Company are presented here.

CRANE COMPANY Income Statements For the Years Ended December 31
		2017		2016
Net sales		$1,897,740		$1,757,700
Cost of goods sold		1,065,740		1,013,200
Gross profit		832,000		744,500
Selling and administrative expenses		507,200		486,200
Income from operations		324,800		258,300
Other expenses and losses
Interest expense		24,100		22,100
Income before income taxes		300,700		236,200
Income tax expense		94,100		75,100
Net income		$ 206,600		$ 161,100

CRANE COMPANY Balance Sheets December 31
Assets		2017		2016
Current assets
Cash		$ 60,100		$ 64,200
Debt investments (short-term)		74,000		50,000
Accounts receivable		125,000		110,000
Inventory		128,100		117,600
Total current assets		387,200		341,800
Plant assets (net)		664,000		535,300
Total assets		$1,051,200		$877,100
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable		$ 167,200		$152,600
Income taxes payable		45,600		44,100
Total current liabilities		212,800		196,700
Bonds payable		235,000		215,000
Total liabilities		447,800		411,700
Stockholders’ equity
Common stock ($5 par)		290,000		300,000
Retained earnings		313,400		165,400
Total stockholders’ equity		603,400		465,400
Total liabilities and stockholders’ equity		$1,051,200		$877,100

All sales were on account. Net cash provided by operating activities for 2017 was $245,000. Capital expenditures were $136,000, and cash dividends were $58,600.

Compute the following ratios for 2017. (Round current ratio, earnings per share and asset turnover to 2 decimal places, e.g 1.83 and all other answers to 1 decimal place, e.g. 1.8 or 2.5%. Use 365 days in calculation.)

(a)		Earnings per share		$
(b)		Return on common stockholders’ equity			%
(c)		Return on assets			%
(d)		Current ratio			:1
(e)		Accounts receivable turnover			times
(f)		Average collection period			days
(g)		Inventory turnover			times
(h)		Days in inventory			days
(i)		Times interest earned			times
(j)		Asset turnover			times
(k)		Debt to assets ratio			%
(l)		Free cash flow		$

Answer 1

Answer of Part a:

Beginning No. of Common Stock = $300,000 / $5
Beginning No. of Common Stock = 60,000

Ending No. of Common Stock = $290,000 / $5
Ending No. of Common Stock = 58,000

Average No. of Common Stock = (Beginning No. of Common Stock + Ending No. of Common Stock) /2
Average No. of Common Stock = (60,000 + 58,000) /2
Average No. of Common Stock = 59,000

Earnings Per Share = Net Income / Average No. of Common Stock
Earnings Per Share = $206,600 / 59,000
Earnings Per Share = $3.50

Answer of Part b:

Average Common Stockholders Equity = (Beginning Stockholders Equity + Ending Stockholders Equity) / 2
Average Common Stockholder Equity = ($465,400 + $603,400) /2
Average Common Stockholder Equity = $534,400

Return on Common Stockholders Equity = Net Income / Average Common Stockholders Equity *100
Return on Common Stockholders Equity = $206,600 / $534,400 *100
Return on Common Stockholders Equity = 38.7%

Answer of Part c:

Average Total Assets = (Beginning Total Assets + Ending Total Assets) /2
Average Total Assets = ($877,100 + $1,051,200) / 2
Average Total Assets = $964,150

Return on Assets = Net Income / Average Total Assets * 100
Return on Assets = $206,600 / $964,150 * 100
Return on Assets = 21.4%

Answer of Part d:

Current Ratio= Current Assets / Current Liabilities
Current Ratio = $387,200 / $212,800
Current Ratio= 1.82:1

Answer of Parte:

Average Accounts Receivable = (Beginning Accounts Receivable+ Ending Accounts Receivable) /2
Average Accounts Receivable= ($110,000 + $125,000)/2
Average Accounts Receivable= $117,500

Accounts Receivable Turnover = Sales / Average Accounts Receivable
Accounts Receivable Turnover = $1,897,740/ $117,500
Accounts Receivable Turnover = 16.2 times