Question

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Some recent financial statements for Smolira Golf Corp. follow.    SMOLIRA GOLF CORP. 2014 and 2015...

Some recent financial statements for Smolira Golf Corp. follow.

  

SMOLIRA GOLF CORP.
2014 and 2015 Balance Sheets
Assets Liabilities and Owners’ Equity
2014 2015 2014 2015
  Current assets   Current liabilities
      Cash $ 23,046 $ 25,100       Accounts payable $ 24,184 $ 28,100
      Accounts receivable 13,448 16,200       Notes payable 20,000 11,800
      Inventory 26,822 28,100       Other 12,571 19,100
        Total $ 63,316 $ 69,400         Total $ 56,755 $ 59,000
  Long-term debt $ 79,000 $ 90,000
  Owners’ equity
      Common stock and paid-in surplus $ 48,000 $ 48,000
      Accumulated retained earnings 214,256 237,000
  Fixed assets
  Net plant and equipment $ 334,695 $ 364,600   Total $ 262,256 $ 285,000
  Total assets $ 398,011 $ 434,000   Total liabilities and owners’ equity $ 398,011 $ 434,000


SMOLIRA GOLF CORP.
2015 Income Statement
  Sales $ 349,760
  Cost of goods sold 241,500
  Depreciation 27,200
  Earnings before interest and taxes $ 81,060
  Interest paid 15,300
  Taxable income $ 65,760
  Taxes (35%) 23,016
  Net income $ 42,744
      Dividends $ 20,000
      Retained earnings 22,744

   

Find the following financial ratios for Smolira Golf Corp. (use year-end figures rather than average values where appropriate): (Enter your profitability ratio answers as a percent rounded to 2 decimal places, e.g., 32.16. Round the remaining answers to 2 decimal places, e.g., 32.16.)

Asset utilization ratios:

e.  Inventory turnover times f.  Receivables turnover times

Long-term solvency ratios: 2014 2015
g.   Total debt ratio times times
h.   Debt–equity ratio times times
i.   Equity multiplier times times

  

  
j.   Times interest earned times
k.   Cash coverage ratio times

  

  Profitability ratios:
I.   Profit margin %
m.   Return on assets %
n.   Return on equity %

Solutions

Expert Solution

2015
e) Inventory Turnover ratio 9.00
COGS/Ending Inventory 241500/26822
If avg is used 8.79
COGS/Avg Inventory 241500/((26822+28100)/2)
f) Receivable Turnover ratio 26.01
Sales/EndingAccounts receivable 349760/13448
If avg is used 23.59
349760/(13448+16200)/2)
As said in the question to use year end figures rather avg figures so answers are accordingly
2014.00 2015.00
g) Total debt ratio 0.34 0.34
Debt/Total assets (56755+79000)/398011 (59000+90000)/434000
h) Debt equity ratio 0.52 0.52
(56755+79000)/262256 (59000+90000)/285000
2015.00
j) Times interest earned 5.30
EBIT/Interest expenses 81060/15300
k)
Cash covergae ratio 7.08
EBIT+Dep exp/Int exp (81060+27200)/15300
l) profit margin 12.22
Net income/sales*100 42744/349760*100
m) Return on Assets 10.74
Net Income/Total assets*100 42744/398011*100
If avg is used 10.27
Net Income/AvgTotal assets*100 42744/((398011+434000)/2)*100
n) Return on Equity 16.30
Net Income/Equity*100 42744/262256*100
15.62
Net Income/Equity*100 42744/((262256+285000)/2)*100

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