Question

Some recent financial statements for Smolira Golf, Inc., follow.

SMOLIRA GOLF, INC. Balance Sheets as of December 31, 2015 and 2016
	2015				2016					2015				2016
Assets									Liabilities and Owners’ Equity
Current assets									Current liabilities
Cash	$	3,091			$	3,107			Accounts payable	$	2,173			$	2,640
Accounts receivable		4,747				5,741			Notes payable		1,770				2,156
Inventory		12,558				13,742			Other		94				111
Total	$	20,396			$	22,590			Total	$	4,037			$	4,907
									Long-term debt	$	13,000			$	15,760
									Owners’ equity
									Common stock and paid-in surplus	$	40,000			$	40,000
Fixed assets									Accumulated retained earnings		15,674				39,404
Net plant and equipment	$	52,315			$	77,481			Total	$	55,674			$	79,404
Total assets	$	72,711			$	100,071			Total liabilities and owners’ equity	$	72,711			$	100,071

SMOLIRA GOLF, INC. 2016 Income Statement
Sales				$	188,170
Cost of goods sold					126,603
Depreciation					5,293
EBIT				$	56,274
Interest paid					1,390
Taxable income				$	54,884
Taxes					19,209
Net income				$	35,675
Dividends	$	11,945
Retained earnings		23,730

Find the following financial ratios for Smolira Golf (use year-end figures rather than average values where appropriate): (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16. Enter the profitability ratios as a percent.)

		2015			2016
Short-term solvency ratios
a.	Current ratio		times			times
b.	Quick ratio		times			times
c.	Cash ratio		times			times
Asset utilization ratios
d.	Total asset turnover					times
e.	Inventory turnover					times
f.	Receivables turnover					times
Long-term solvency ratios
g.	Total debt ratio		times			times
h.	Debt−equity ratio		times			times
i.	Equity multiplier		times			times
j.	Times interest earned ratio					times
k.	Cash coverage ratio					times
Profitability ratios
l.	Profit margin					%
m.	Return on assets					%
n.	Return on equity					%
Some recent financial statements for Smolira Golf, Inc., follow. SMOLIRA GOLF, INC. Balance Sheets as of December 31, 2015 and 2016 2015 2016 2015 2016 Assets Liabilities and Owners’ Equity Current assets Current liabilities Cash $ 3,091 $ 3,107 Accounts payable $ 2,173 $ 2,640 Accounts receivable 4,747 5,741 Notes payable 1,770 2,156 Inventory 12,558 13,742 Other 94 111 Total $ 20,396 $ 22,590 Total $ 4,037 $ 4,907 Long-term debt $ 13,000 $ 15,760 Owners’ equity Common stock and paid-in surplus $ 40,000 $ 40,000 Fixed assets Accumulated retained earnings 15,674 39,404 Net plant and equipment $ 52,315 $ 77,481 Total $ 55,674 $ 79,404 Total assets $ 72,711 $ 100,071 Total liabilities and owners’ equity $ 72,711 $ 100,071 SMOLIRA GOLF, INC. 2016 Income Statement Sales $ 188,170 Cost of goods sold 126,603 Depreciation 5,293 EBIT $ 56,274 Interest paid 1,390 Taxable income $ 54,884 Taxes 19,209 Net income $ 35,675 Dividends $ 11,945 Retained earnings 23,730 Find the following financial ratios for Smolira Golf (use year-end figures rather than average values where appropriate): (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16. Enter the profitability ratios as a percent.) 2015 2016 Short-term solvency ratios a. Current ratio times times b. Quick ratio times times c. Cash ratio times times Asset utilization ratios d. Total asset turnover times e. Inventory turnover times f. Receivables turnover times Long-term solvency ratios g. Total debt ratio times times h. Debt−equity ratio times times i. Equity multiplier times times j. Times interest earned ratio times k. Cash coverage ratio times Profitability ratios l. Profit margin % m. Return on assets % n. Return on equity %

Answer 1

Answer a.

Current Ratio = Current Assets / Current Liabilities

2015:

Current Ratio = $20,396 / $4,037
Current Ratio = 5.05 times

2016:

Current Ratio = $22,590 / $4,907
Current Ratio = 4.60 times

Answer b.

Quick Ratio = (Current Assets - Inventory) / Current Liabilities

2015:

Quick Ratio = ($20,396 - $12,558) / $4,037
Quick Ratio = 1.94 times

2016:

Quick Ratio = ($22,590 - $13,742) / $4,907
Quick Ratio = 1.80 times

Answer c.

Cash Ratio = Cash / Current Liabilities

2015:

Cash Ratio = $3,091 / $4,037
Cash Ratio = 0.77 times

2016:

Cash Ratio = $3,1070 / $4,907
Cash Ratio = 0.63 times

Answer d.

Total Assets Turnover = Sales / Total Assets
Total Assets Turnover = $188,170 / $100,071
Total Assets Turnover = 1.88 times

Answer e.

Inventory Turnover = Sales / Inventory
Inventory Turnover = $188,170 / $13,742
Inventory Turnover = 13.69 times

Answer f.

Receivables Turnover = Sales / Accounts Receivable
Receivables Turnover = $188,170 / $5,741
Receivables Turnover = 32.78 times