Question

The balance sheet for Campbell Corporation follows:

Current assets	$	235,000
Long-term assets (net)		759,000
Total assets	$	994,000
Current liabilities	$	149,000
Long-term liabilities		454,000
Total liabilities		603,000
Common stock and retained earnings		391,000
Total liabilities and stockholders’ equity	$	994,000

Required

Compute the following. (Round "Ratios" to 1 decimal place.)

	Working capital Current ratio Debt to assets ratio % Debt to equity ratio

The following data come from the financial records of Solomon Corporation for 2018:

Sales	$	845,000
Interest expense		4,300
Income tax expense		29,000
Net income		24,000

Required

How many times was interest earned in 2018? (Round your answer to 2 decimal places.)

Selected data from Benson Company follow:

   

Balance Sheets As of December 31
	2018				2017
Accounts receivable	$	406,000			$	380,000
Allowance for doubtful accounts		(20,300	)			(15,200	)
Net accounts receivable	$	385,700			$	364,800
Inventories, lower of cost or market	$	484,500			$	443,000

Income Statement For the Years Ended December 31
	2018				2017
Net credit sales	$	2,007,000			$	1,759,000
Net cash sales		401,000				300,000
Net sales		2,408,000				2,059,000
Cost of goods sold		1,608,000				1,432,000
Selling, general, and administrative expenses		239,800				214,800
Other expenses		40,400				23,600
Total operating expenses	$	1,888,200			$	1,670,400

Required

Compute the accounts receivable turnover for 2018.

Compute the inventory turnover for 2018.

Compute the net margin for 2017.

(For all requirements, round your answers to 2 decimal places.)

a.	Accounts receivable turnover		times
b.	Inventory turnover		times
c.	Net margin		%

  

Answer 1

	Campbell Corporation
1	Working Capital	Current Assets - Current Liabilities
		235,000-149,000
		86,000.00
2	Current Ratio	Current Assets / Current Liabilities
		235,000/149,000
		1.6
3	Debt to Assets Ratio	Total Liabilities / Total Assets
		603,000/ 994,000
		0.6	60.7%
4	Debt to Equity Ratio	Total Liabilities / Shareholders Equity
		603,000/ 391,000
		1.5	154.2%
	Solomon Corporation
5	Times interest earned	Earnings before interest and taxes ÷ Interest expense
		(24,000+29,000+4,300)/4300
		13.33
	Benson Company
6	Accounts receivable turnover	Net Credit Sales / Average Accounts Receivables
		Accounts Receivables (Opening)			364800
		Accounts Receivables (Closing)			385700
		Average Accounts Receivables (net)			375250
		By using the formula of receivables turnover ratio, we get –
		Net Credit Sales			2007000
		Average Accounts Receivables			375250
		Receivables Turnover Ratio			5	times
7	Inventory turnover	Cost of Goods Sold / Average Inventories
		Inventory (Beginning)		443000
		Inventory (Ending)		484500
		Average Inventories		463750
		Using the inventory turnover ratio, we get –
		Cost of Goods Sold		1608000
		Average Inventories		463750
		Inventory Turnover		3.47
8	net margin for 2017	Net Profit / Net Sales * 100
		net sales	20,59,000.00
		Net Profit
		Sales	20,59,000.00
	Less	Total operating expenses	16,70,400.00
			3,88,600.00
		Using the formula of net profit margin, we get –
		Net Profit Margin	18.87%