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Ratios (Appendix) Miller Company's condensed income statement for 2016 and December 31, 2016, balance sheet follow:...

Ratios (Appendix)

Miller Company's condensed income statement for 2016 and December 31, 2016, balance sheet follow:

Income Statement

Sales (net)		$304,400
Cost of goods sold		(183,600)
Gross profit		$120,800
Operating expenses		(82,000)
Operating income		$38,800
Interest expense		(7,000)
Income before income taxes		$31,800
Income taxes		(10,000)
Net income		21,800

Balance Sheet

Cash	$8,200	Accounts payable	$18,000
Receivables (net)	14,700	Other current liabilities	6,800
Inventory	19,300	Bonds payable, 10%	70,000
Property, plant, and equipment (net)	195,800	Common stock, $10 par	80,500
		Additional paid-in capital on common stock	24,000
		Retained earnings	38,700
Total Assets	$238,000	Total Liabilities and Shareholders' Equity	$238,000

Additional information: The common stock was outstanding the entire year and is selling for $16 per share at year-end. On January 1, 2016, the inventory was $21,500, the total assets were $224,000, the accounts payable were $18,800, and the total shareholders' equity was $130,800. The company operates on a 365-day business year.

Required

For the Miller Company, compute the following ratios:

1. Gross profit margin: (Round to two decimal places.)	%
2. Operating profit margin: (Round to two decimal places.)	%
3. Net profit margin: (Round to two decimal places.)	%
4. Total asset turnover: (Round to two decimal places.)	times
5. Return on total assets: (Round to two decimal places. Round tax rate to the nearest whole percent in your intermediate calculations.)	%
6. Return on common equity: (Round to two decimal places.)	%
7. Current ratio: (Round to one decimal place.)	: 1
8. Inventory turnover: (in days) (Round to nearest whole day.)	days
9. Payables turnover: (in days) (Round to nearest whole day. Do not round your intermediate calculations.)	days

Expert Solution

1. Gross profit margin = (Gross Profit/Net Sales) x 100 = ($120,800/$304,400) x 100 = 39.68%

2. Operating profit margin = (Operating Profit/Net Sales) x 100 = ($38,800/$304,400) x 100 = 12.74%

3. Net profit margin = (Net Profit/Net Sales) x 100 = ($21,800/$304,400) x 100 = 7.16%

4. Total asset turnover = Net sales/Average total assets = $304,400/(($224,000+$238,000)/2) = 0.91times

5. Return on total assets = (EBIT/Total net assets) x 100 = ($38,800/($238,000-$94,800)) x 100 = 27.09%

6. Return on common equity = (Net Income/Total Average Equity) x 100 = ($21,800/($130,800+$143,200)/2) x 100

= 15.91%

7. Current ratio = Current Assets/Current liabilities = $42,200/$24,800 = 1.7

8. Inventory turnover days = (365 x Average inventory)/Net sales = (365 x (($21,500+$19,300)/2))/$304,400

= 24 days

9. Payables turnover days = (365 x Average payables)/Net sales = (365 x (($18,800+$18,000)/2))/$304,400

22 days

ekkarill92 answered 2 years ago

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