In: Accounting
The following financial statements apply to Thornton Company:
Year 4 | Year 3 | ||||||
Revenues | |||||||
Net sales | $ | 210,100 | $ | 175,600 | |||
Other revenues | 8,600 | 6,600 | |||||
Total revenues | 218,700 | 182,200 | |||||
Expenses | |||||||
Cost of goods sold | 125,900 | 102,500 | |||||
Selling expenses | 19,900 | 17,900 | |||||
General and administrative expenses | 10,100 | 9,100 | |||||
Interest expense | 1,500 | 1,500 | |||||
Income tax expense | 19,300 | 17,300 | |||||
Total expenses | 176,700 | 148,300 | |||||
Net income | $ | 42,000 | $ | 33,900 | |||
Assets | |||||||
Current assets | |||||||
Cash | $ | 5,400 | $ | 6,400 | |||
Marketable securities | 1,200 | 1,200 | |||||
Accounts receivable | 36,300 | 31,500 | |||||
Inventories | 101,800 | 95,000 | |||||
Prepaid expenses | 3,700 | 2,700 | |||||
Total current assets | 148,400 | 136,800 | |||||
Plant and equipment (net) | 106,500 | 106,500 | |||||
Intangibles | 21,100 | 0 | |||||
Total assets | $ | 276,000 | $ | 243,300 | |||
Liabilities and Stockholders’ Equity | |||||||
Liabilities | |||||||
Current liabilities | |||||||
Accounts payable | $ | 38,500 | $ | 55,500 | |||
Other | 15,800 | 16,600 | |||||
Total current liabilities | 54,300 | 72,100 | |||||
Bonds payable | 65,600 | 66,600 | |||||
Total liabilities | 119,900 | 138,700 | |||||
Stockholders’ equity | |||||||
Common stock (43,000 shares) | 113,000 | 113,000 | |||||
Retained earnings | 43,100 | (8,400 | ) | ||||
Total stockholders’ equity | 156,100 | 104,600 | |||||
Total liabilities and stockholders’ equity | $ | 276,000 | $ | 243,300 | |||
Required
Calculate the following ratios for Year 3 and Year 4. Since Year 2
numbers are not presented do not use averages when calculating the
ratios for Year 3. Instead, use the number presented on the Year 3
balance sheet.
a. Net margin. (Round your answers to 2
decimal places.)
b. Return on investment. (Round your
answers to 2 decimal places.)
c. Return on equity. (Round your answers
to 2 decimal places.)
d. Earnings per share. (Round your answers
to 2 decimal places.)
e. Price-earnings ratio (market prices at the end
of Year 3 and Year 4 were $5.95 and $4.94, respectively).
(Round your intermediate calculations and final answers to
2 decimal places.)
f. Book value per share of common stock.
(Round your answers to 2 decimal places.)
g. Times interest earned. Exclude extraordinary
income in the calculation as they cannot be expected to recur and,
therefore, will not be available to satisfy future interest
payments. (Round your answers to 2 decimal
places.)
h. Working capital.
i. Current ratio. (Round your answers to 2
decimal places.)
j. Quick (acid-test) ratio. (Round your
answers to 2 decimal places.)
k. Accounts receivable turnover. (Round
your answers to 2 decimal places.)
l. Inventory turnover. (Round your answers
to 2 decimal places.)
m. Debt-to-equity ratio. (Round your
answers to 2 decimal places.)
n. Debt-to-assets ratio. (Round your
answers to the nearest whole percent.)
Statement showing Calculation Of Ratios
S.No | Particulars | Year 3 | Year 4 |
(a) | Net margin Ratio | 19.20% | 18.61% |
(b) | Return on investments | 18.94% | 19.80% |
(C) | Return on equity | 37.17% | 30% |
(d) | Earning Per Share | $0.98 | $0.79 |
(e) | Price earning Ratio | 6.07 times | 6.25 times |
(f) | Book value per share | $3.63 | $2.43 |
(g) | Times interest earned. | 41.87 times | 35.13 times |
(h) | Working Capital | $94100 | $64700 |
(i) | Current ratio | 2.73 | 1.90 |
(j) | Quick (acid-test) ratio. | 0.79 | 0.54 |
(k) | Accounts receivable turnover | 5.79 times | 5.57 times |
(l) | Inventory turnover | 1.24 | 1.08 |
(m) | Debt-to-equity ratio. | 0.77 | 1.33 |
(n) | Debt-to-assets ratio. | 43.44% | 57% |
Notes.
(a) The profit margin ratio can be calculated by dividing net income by total revenue.
(b) Return on investment can be calculated by deviding net income by Total assets-Current Liabilities.
(c)ROE Ratio = Net Income/ Shareholder's Equity.
(d) Earning per share= Net incomes devided by total number of shares.
(e)Price earning Ratio= Market price per share devided by Earning per share.
(f)Book Value per share= Equity share capital+Retained earning devided by total number of shares.
(g) time interest earned= Earning before interest and taxes devided by interest Expeness.
(h)Working capital= Total current assets-Total current liabilities.
(i)Quick ratio= total current assets-inventory-Prepaid expenes devided by total current liabilities.
(j) current ratio= total current assets devided by total current liabilities.
(k) Account receivable Turnover ratio=Total credit sales devided by Average account receivables.
(l)Inventory turnover ratio= Cost of goods sold devided by Average inventory.
(m)Debts to Equity ratio= Total debts devided by equity shareholders funds.
(n)Debts to total assets ratio= % of debts of total assets