Question

The balance sheet and income statement shown below are for Pettijohn Inc. Note that the firm has no amortization charges, it does not lease any assets, none of its debt must be retired during the next 5 years, and the notes payable will be rolled over.

Balance Sheet (Millions of $)
Assets	2018
Cash and securities	$ 1,554.0
Accounts receivable	9,660.0
Inventories	13,440.0
Total current assets	$24,654.0
Net plant and equipment	17,346.0
Total assets	$42,000.0
Liabilities and Equity
Accounts payable	$ 7,980.0
Notes payable	5,880.0
Accruals	4,620.0
Total current liabilities	$18,480.0
Long-term bonds	10,920.0
Total debt	$29,400.0
Common stock	3,360.0
Retained earnings	9,240.0
Total common equity	$12,600.0
Total liabilities and equity	$42,000.0
Income Statement (Millions of $)	2012
Net sales	$58,800.0
Operating costs except depr'n	$54,978.0
Depreciation	$ 1,029.0
Earnings bef int and taxes (EBIT)	$ 2,793.0
Less interest	1,050.0
Earnings before taxes (EBT)	$ 1,743.0
Taxes	$     610.1
Net income	$ 1,133.0
Other data:
Shares outstanding (millions)	175.00
Common dividends	$   509.83
Int rate on notes payable & L-T bonds	6.25%
Federal plus state income tax rate	35%
Year-end stock price	$77.69

Keep two decimal places for financial ratio calculation.

1, What is the firm's current ratio?

2), What is the firm's quick ratio?

3), What is the firm's days sales outstanding? Assume a 360-day year for this calculation.

4), What is the firm's total assets turnover

5). What is the firm's inventory turnover ratio?

6), What is the firm's TIE?

7), What is the firm's debt-to-assets ratio? (in %, round to 1 decimal place)

8), What is the firm's ROA? (in %, round to 2 decimal places)

9), What is the firm's ROE? (in %, round to 2 decimal places)

10), What is the firm's BEP? (in %, round to 2 decimal places)

11), What is the firm's profit margin? (in %, round to 2 decimal places)

12), What is the firm's EPS($)?

13), What is the firm's P/E ratio?

14), What is the firm's market-to-book ratio?

15), What is the firm's equity multiplier?

Answer 1

Financial Ratios calculation:

(1). Current ratio:

Formula: Current ratio = Current assets / Current liabilities

where, current assets = (Cash and securities + Accounts receivable + Inventories) = ($1,554.0 + $9660.0 + $13,440.0) = $24,654.0

Current liabilities = (Accounts payable + Notes payable + Accruals) = ($7980.0 + $5880.0 + $4620.0) = $18,480.0

therefore, current ratio = $24,654.0 / $18,480.0 = 1.33

(2). Quick ratio:

Formula: Quick ratio = quick assets / current liabilities

quick assets = Current assets - inventory = $24,654.0 - $13,440.0 = $11,214

current liabilities = $18,480.0

therefore, quick ratio = $11,214 / $18,480 = 0.6068 or 0.61

(3). Days sales outstanding(DSO):

Formula: Days sales outstanding = (Accounts receivables / Net credit sales) * number of days

Accounts receivables = $9,660

Net sales = $58,800.0

number of days = 360

therefore, days sales outstanding = ($9,660 / $58,800) * 360 = 59.14 days

(4). Total assets turnover:

Formula: total assets turnover = Net sales / average total assets

where, Net sales = $58,800

average total assets = $42,000

Note: To calculate average total assets we need to have both begining and ending balances of total assets. But here in this question we have only year end data, so we are taking total assets as average total assets.

therefore, total assets turnover = $58,800 / $42,000 = 1.40