In: Accounting
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 |
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