Question

The following financial statements apply to Munoz Company:

	2019				2018
Revenues
Net sales	$	210,800			$	176,600
Other revenues		9,500				7,000
Total revenues		220,300				183,600
Expenses
Cost of goods sold		124,200				101,800
Selling expenses		20,100				18,100
General and administrative expenses		9,300				8,300
Interest expense		2,700				2,700
Income tax expense		19,100				17,500
Total expenses		175,400				148,400
Net income	$	44,900			$	35,200
Assets
Current assets
Cash	$	4,100			$	7,000
Marketable securities		2,000				2,000
Accounts receivable		36,700				30,800
Inventories		100,000				94,700
Prepaid expenses		3,700				2,700
Total current assets		146,500				137,200
Plant and equipment (net)		105,100				105,100
Intangibles		20,600				0
Total assets	$	272,200			$	242,300
Liabilities and Stockholders’ Equity
Liabilities
Current liabilities
Accounts payable	$	39,800			$	54,400
Other		15,100				15,600
Total current liabilities		54,900				70,000
Bonds payable		64,500				65,500
Total liabilities		119,400				135,500
Stockholders’ equity
Common stock (50,000 shares)		114,700				114,700
Retained earnings		38,100				(7,900	)
Total stockholders’ equity		152,800				106,800
Total liabilities and stockholders’ equity	$	272,200			$	242,300

Required

Calculate the following ratios for 2018 and 2019. Since 2017 numbers are not presented do not use averages when calculating the ratios for 2018. Instead, use the number presented on the 2018 balance sheet.

1. Net margin. (Round your answers to 2 decimal places.)
2. Return on investment. (Round your answers to 2 decimal places.)
3. Return on equity. (Round your answers to 2 decimal places.)
4. Earnings per share. (Round your answers to 2 decimal places.)
5. Price-earnings ratio (market prices at the end of 2018 and 2019 were $6.06 and $4.84, respectively). (Round your intermediate calculations and final answers to 2 decimal places.)
6. Book value per share of common stock. (Round your answers to 2 decimal places.)
7. 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.)
8. Working capital.
9. Current ratio. (Round your answers to 2 decimal places.)
10. Quick (acid-test) ratio. (Round your answers to 2 decimal places.)
11. Accounts receivable turnover. (Round your answers to 2 decimal places.)
12. Inventory turnover. (Round your answers to 2 decimal places.)
13. Debt to equity ratio. (Round your answers to 2 decimal places.)
14. Debt to assets ratio. (Round your answers to the nearest whole percent.)

		2019		2018
a.	Net margin		%		%
b.	Return on investment		%		%
c.	Return on equity		%		%
d.	Earnings per share
e.	Price-earnings ratio		times		times
f.	Book value
g.	Interest earned		times		times
h.	Working capital
i.	Current ratio
j.	Quick (acid-test) ratio
k.	Accounts receivable turnover		times		times
l.	Inventory turnover		times		times
m.	Debt to equity ratio
n.	Debt to assets ratio		%		%

Answer 1

net margin	(net income/net sales)*100
	2019 ($)	2018 ($)
net income	44900	35200
net sales	210800	176600
ratio	21.30%	19.93%
return on equity	net income / shareholders equity
	2019 ($)	2018 ($)
net income	44900	35200
total shareholders equity	152800	106800
ratio	29.38%	32.96%
earnings per share	(net income - preferred dividends) / weighted average shares outstanding
	2019 ($)	2018 ($)
net income	44900	35200
preferred dividends	0	0
number of shares outstanding	50000	50000
ratio ($ per share)	0.90	0.70
price-earnings ratio	market value per share / earnings per share
	2019 ($)	2018 ($)
market value per share	4.84	6.06
earnings per share	0.90	0.70
ratio	5.38 times	8.66 times
book value per share	(total common stockholders equity - preferred stock)/number of common shares
	2019 ($)	2018 ($)
total common stockholders equity	152800	106800
preferred stock	0	0
number of common shares	50000	50000
ratio ($ per share)	3.06	2.14
times interest earned	earnings before interest and tax / interest expense
	2019 ($)	2018 ($)
net income	44900	35200
add:income tax	19100	17500
add:interest expense	2700	2700
earning before interest and tax	66700	55400
ratio	24.70 times	20.52 times
working capital	current assets - current liabilities
	2019 ($)	2018 ($)
total current assets	146500	137200
total current liabilities	54900	70000
ratio	91600	67200
current ratio	current assets / current liabilities
	2019 ($)	2018 ($)
total current assets	146500	137200
total current liabilities	54900	70000
ratio	2.67	1.96
quick(acid-test) ratio	quick assets / current liabilities
	2019 ($)	2018 ($)
cash	4100	7000
marketable securities	2000	2000
accounts receivable	36700	30800
total quick assets	42800	39800
total current liabilities	54900	70000
ratio	0.78	0.57
accounts receivable turnover	sales / average accounts receivable
	2019 ($)	2018 ($)
net sales	210800	176600
opening accounts receivable	30800	0
closing accounts receivable	36700	30800
average accounts receivable	33750	30800
ratio (in times)	6.25 times	5.73 times
inventory turnover	cost of goods sold / average inventories
	2019 ($)	2018 ($)
cost of goods sold	124200	101800
opening inventory	94700
closing inventory	100000	94700
average inventory	97350	94700
ratio	1.28 times	1.07 times
debt to equity	total liabilities / total shareholders equity
	2019 ($)	2018 ($)
total liabilities	119400	135500
total shareholders equity	152800	106800
ratio	0.78	1.27
debt to assets	total debt / total assets
	2019 ($)	2018 ($)
total debt (bonds)	64500	65500
total assets	272200	242300
ratio	24%	27%