Question

Calculating financial​ ratios)  The balance sheet and income statement for the J. P. Robard Mfg. Company are as​ follows:  

J. P. Robard​ Mfg., Inc. Balance Sheet​ ($000)
Cash	$490
Accounts receivable	2,090
Inventories	1,090
Current assets	$3,670
Net fixed assets	4,600
Total assets	$8,270
Accounts payable	$1,020
Accrued expenses	630
​Short-term notes payable	250
Current liabilities	$1,900
​Long-term debt	1,970
​Owners' equity	4,400
Total liabilities and​ owners' equity	$8,270

J. P. Robard​ Mfg., Inc. Income Statement​ ($000)
Net sales​ (all credit)	$8,040
Cost of goods sold	(3,280)
Gross profit	$4,760
Operating expenses​ (includes $500​ depreciation)	(3,040)
Net operating income	$1,720
Interest expense	(352)
Earnings before taxes	$1,368
Income taxes ​(35%​)	(479)
Net income

. Calculate the following​ ratios:

Current ratio Times interest earned Inventory turnover Total asset turnover Operating profit margin

Operating return on assets Debt ratio Average collection period Fixed asset turnover Return on equity

Answer 1

Answer:

Current Ratio = Current Assets / Current Liabilities
Current Ratio = 3,670 / 1900
Current Ratio = 1.93

Operating Return on assets = Net Income / Operating Assets
Operating Return on assets = 889 / 8,270
Operating Return on assets = 10.75%

Times interest earned = EBIT / Interest Expense
Times interest earned = 1,720 / 352
Times interest earned = 4.89

Debt Ratio = Total debt / Total assets
Debt Ratio = 3,870 / 8,270
Debt ratio = 0.47

Inventory Turnover = Cost of goods sold / Inventory
Inventory Turnover = 3,280 / 1,090
Inventory Turnover = 3.01

Average collection period = (Accounts receivables / Net credit sales) * 365
Average collection period = (2,090 / 8,040) * 365
Average collection period = 94.88 days

Total asset turnover = Net sales / Total assets
Total asset turnover = (8,040 / 8,270)
Total asset turnover = 0.97

Fixed asset turnover = Net sales / Fixed assets
Fixed asset turnover = 8,040 / 4,600
Fixed asset turnover = 1.75

Operating profit margin = (Operating profit / Net sales) * 100
Operating profit margin = (4,760 / 8,040) * 100
Operating profit margin = 59.20%

Return on equity = Net income / Shareholder's equity
Return on equity = (889 / 4,400) * 100
Return on equity = 20.20%