Question

Selected year-end financial statements of Cabot Corporation follow. (All sales were on credit; selected balance sheet amounts at December 31, 2017, were inventory, $48,900; total assets, $199,400; common stock, $82,000; and retained earnings, $33,888.)

CABOT CORPORATION Income Statement For Year Ended December 31, 2018
Sales	$	450,600
Cost of goods sold		298,050
Gross profit		152,550
Operating expenses		99,300
Interest expense		4,500
Income before taxes		48,750
Income tax expense		19,638
Net income	$	29,112

CABOT CORPORATION Balance Sheet December 31, 2018
Assets				Liabilities and Equity
Cash	$	10,000		Accounts payable	$	17,500
Short-term investments		9,000		Accrued wages payable		4,600
Accounts receivable, net		34,000		Income taxes payable		4,500
Merchandise inventory		34,150		Long-term note payable, secured by mortgage on plant assets		66,400
Prepaid expenses		2,550		Common stock		82,000
Plant assets, net		148,300		Retained earnings		63,000
Total assets	$	238,000		Total liabilities and equity	$	238,000

Compute the total asset turnover.

	(9) Total Asset Turnover Choose Numerator: / Choose Denominator: = Total Asset Turnover / = Total asset turnover 2018: / = 0 times

Compute the return on total assets.

	(10) Return on Total Assets Choose Numerator: / Choose Denominator: = Return on Total Assets / = Return on total assets 2018: / = 0 %

Compute the return on common stockholders' equity.

	(11) Return on Common Stockholders' Equity Choose Numerator: / Choose Denominator = Return On Common Stockholders' Equity - / = Return on common stockholders' equity 2018: - / = 0 %

Answer 1

9. Total Asset Turnover = Sales / Avg,Total Asset = 450600 / ( 199400 + 238000 ) / 2 = 450600 / 218700 = 2.06

10. Return on Total Assets = Net Income / Avg,Total Asset = 29112 / ( 199400 + 238000 ) / 2 = 29112 / 218700 = 13.31%

11. Return on Common Stockholders' Equity = Net Income / Avg.Common Stockholders' Equity

                                                                      = 29112 / (82000 + 33888 + 82000 + 63000 ) / 2

                                                                      = 29112 / 130444

                                                                      = 22.32%