Some recent financial statements for Smolira Golf Corp. follow. Use this information to work Problems 26 through 30.
SMOLIRA GOLF CORP. 2015 Income Statement | ||
Sales | $422,045 | |
Cost of goods sold | 291,090 | |
37,053 | ||
Earnings before interest and taxes | $ 93,902 | |
Interest paid | 16,400 | |
Taxable income | $ 77,502 | |
Taxes (35%) | 27,126 | |
Net income | $ 50,376 | |
Dividends | $20,000 | |
|
30,376 |
26. Calculating Financial Ratios [LO2] Find the following financial ratios for Smolira Golf Corp. (use year-end figures rather than average values where appropriate):
Short-term solvency ratios:
a. Current ratio | ____________________ |
b. Quick ratio | ____________________ |
c. Cash ratio | ____________________ |
Asset utilization ratios:
d. Total asset turnover | ____________________ |
e. Inventory turnover | ____________________ |
f. Receivables turnover | ____________________ |
Long-term solvency ratios:
g. Total debt ratio | ____________________ |
h. Debt–equity ratio | ____________________ |
i. Equity multiplier | ____________________ |
j. Times interest earned ratio | ____________________ |
k. Cash coverage ratio | ____________________ |
Profitability ratios:
l. Profit margin | ____________________ |
m. |
____________________ |
n. |
____________________ |
a)
To find: The financial current ratio of Company SG
Introduction:
The process of analyzing and calculating the financial ratios for the evaluation of the performance of the firm and to find the actions that are necessary to improve the firm’s performance is ratio analysis.
Answer to Problem 26QP
The current ratio for 2014 and 2015 is 1.10 times and 1.15 times.
Explanation of Solution
Given information:
The balance sheet of the Company SG shows the following information:
- The total assets for the year 2014 is $425,239 and for 2015 is $478,319
- The total liabilities and equity for the year 2014 is 425,239 and for 2015 is $478,319
- The cash at the beginning and end of the year are $26,450 and $29,106 respectively.
- The accounts receivable for the year 2014 and 2015 are $13,693 and $18,282 respectively.
- The inventory for the year 2014 and 2015 are $27,931 and $32,586 respectively.
- The fixed asset for the year 2014 and 2015 are $357,165 and $398,345 respectively.
- The accounts payable for the year 2014 and 2015 are $30,602 and $35,485 respectively.
- The other current liabilities for the year 2014 and 2015 are $15,280 and $20,441 respectively.
- The notes payable for the year 2014 and 2015 are $15,840 and $13,500 respectively.
- The long-term debt for the year 2014 and 2015 are $95,000 and $110,000.
- The common stock and paid in surplus for 2014 is $45,000 and for 2015 is $45,000
- The accumulated retained earnings for 2014 is $223,517 and 2015 is $253,893
- The net income is $50,376.
- The depreciation is $37,053.
- The dividend paid is $20,000.
- The cost of goods sold amounts to $291,090
- The sales is $422,045
- The earnings before interest and taxes is $93,902
- The interest paid is $16,400
- The retained earnings is $30,376
- The taxable income is $77,502
Short-term solvency ratios:
Formula to calculate the current ratio:
Compute the current ratio:
Hence, the current ratio for 2014 is 1.10 times
Hence, the current ratio for 2015 is 1.15 times
b)
To find: The financial quick ratio of Company SG
Introduction:
The process of analyzing and calculating the financial ratios for the evaluation of the performance of the firm and to find the actions that are necessary to improve the firm’s performance is ratio analysis.
Answer to Problem 26QP
The quick ratio for 2014 and 2015 is 0.65 and 0.68 times.
Explanation of Solution
Given information:
The balance sheet of the Company SG shows the following information:
- The total assets for the year 2014 is $425,239 and for 2015 is $478,319
- The total liabilities and equity for the year 2014 is 425,239 and for 2015 is $478,319
- The cash at the beginning and end of the year are $26,450 and $29,106 respectively.
- The accounts receivable for the year 2014 and 2015 are $13,693 and $18,282 respectively.
- The inventory for the year 2014 and 2015 are $27,931 and $32,586 respectively.
- The fixed asset for the year 2014 and 2015 are $357,165 and $398,345 respectively.
- The accounts payable for the year 2014 and 2015 are $30,602 and $35,485 respectively.
- The other current liabilities for the year 2014 and 2015 are $15,280 and $20,441 respectively.
- The notes payable for the year 2014 and 2015 are $15,840 and $13,500 respectively.
- The long-term debt for the year 2014 and 2015 are $95,000 and $110,000.
- The common stock and paid in surplus for 2014 is $45,000 and for 2015 is $45,000
- The accumulated retained earnings for 2014 is $223,517 and 2015 is $253,893
- The net income is $50,376.
- The depreciation is $37,053.
- The dividend paid is $20,000.
- The cost of goods sold amounts to $291,090
- The sales is $422,045
- The earnings before interest and taxes is $93,902
- The interest paid is $16,400
- The retained earnings is $30,376
- The taxable income is $77,502
Formula to calculate Quick ratio:
Compute the quick ratio:
Hence, the quick ratio for 2014 is 0.65 times
Hence, the quick ratio for 2015 is 0.68 times.
c)
To find: The financial cash ratio of Company SG
Introduction:
The process of analyzing and calculating the financial ratios for the evaluation of the performance of the firm and to find the actions that are necessary to improve the firm’s performance is ratio analysis.
Answer to Problem 26QP
The cash ratio for 2014 and 2015 is 0.43 times and 0.42 times.
Explanation of Solution
Given information:
The balance sheet of the Company SG shows the following information:
- The total assets for the year 2014 is $425,239 and for 2015 is $478,319
- The total liabilities and equity for the year 2014 is 425,239 and for 2015 is $478,319
- The cash at the beginning and end of the year are $26,450 and $29,106 respectively.
- The accounts receivable for the year 2014 and 2015 are $13,693 and $18,282 respectively.
- The inventory for the year 2014 and 2015 are $27,931 and $32,586 respectively.
- The fixed asset for the year 2014 and 2015 are $357,165 and $398,345 respectively.
- The accounts payable for the year 2014 and 2015 are $30,602 and $35,485 respectively.
- The other current liabilities for the year 2014 and 2015 are $15,280 and $20,441 respectively.
- The notes payable for the year 2014 and 2015 are $15,840 and $13,500 respectively.
- The long-term debt for the year 2014 and 2015 are $95,000 and $110,000.
- The common stock and paid in surplus for 2014 is $45,000 and for 2015 is $45,000
- The accumulated retained earnings for 2014 is $223,517 and 2015 is $253,893
- The net income is $50,376.
- The depreciation is $37,053.
- The dividend paid is $20,000.
- The cost of goods sold amounts to $291,090
- The sales is $422,045
- The earnings before interest and taxes is $93,902
- The interest paid is $16,400
- The retained earnings is $30,376
- The taxable income is $77,502
Formula to calculate the cash ratio:
Compute the cash ratio:
Hence, the cash ratio for 2014 is 0.43 times
Hence, the cash ratio for 2015 is 0.42 times
d)
To find: The financial total asset turnover ratio of Company SG
Introduction:
The process of analyzing and calculating the financial ratios for the evaluation of the performance of the firm and to find the actions that are necessary to improve the firm’s performance is ratio analysis.
Answer to Problem 26QP
The total asset turnover ratio is 0.88 times.
Explanation of Solution
Asset utilization ratios:
Given information:
The balance sheet of the Company SG shows the following information:
- The total assets for the year 2014 is $425,239 and for 2015 is $478,319
- The total liabilities and equity for the year 2014 is 425,239 and for 2015 is $478,319
- The cash at the beginning and end of the year are $26,450 and $29,106 respectively.
- The accounts receivable for the year 2014 and 2015 are $13,693 and $18,282 respectively.
- The inventory for the year 2014 and 2015 are $27,931 and $32,586 respectively.
- The fixed asset for the year 2014 and 2015 are $357,165 and $398,345 respectively.
- The accounts payable for the year 2014 and 2015 are $30,602 and $35,485 respectively.
- The other current liabilities for the year 2014 and 2015 are $15,280 and $20,441 respectively.
- The notes payable for the year 2014 and 2015 are $15,840 and $13,500 respectively.
- The long-term debt for the year 2014 and 2015 are $95,000 and $110,000.
- The common stock and paid in surplus for 2014 is $45,000 and for 2015 is $45,000
- The accumulated retained earnings for 2014 is $223,517 and 2015 is $253,893
- The net income is $50,376.
- The depreciation is $37,053.
- The dividend paid is $20,000.
- The cost of goods sold amounts to $291,090
- The sales is $422,045
- The earnings before interest and taxes is $93,902
- The interest paid is $16,400
- The retained earnings is $30,376
- The taxable income is $77,502
Formula to calculate the total asset turnover ratio:
Compute the total asset turnover ratio:
Hence, the total asset turnover ratio is 0.88 times.
e)
To find: The inventory turnover ratio of Company SG
Introduction:
The process of analyzing and calculating the financial ratios for the evaluation of the performance of the firm and to find the actions that are necessary to improve the firm’s performance is ratio analysis.
Answer to Problem 26QP
The inventory turnover ratio is 8.93 times.
Explanation of Solution
Given information:
The balance sheet of the Company SG shows the following information:
- The total assets for the year 2014 is $425,239 and for 2015 is $478,319
- The total liabilities and equity for the year 2014 is 425,239 and for 2015 is $478,319
- The cash at the beginning and end of the year are $26,450 and $29,106 respectively.
- The accounts receivable for the year 2014 and 2015 are $13,693 and $18,282 respectively.
- The inventory for the year 2014 and 2015 are $27,931 and $32,586 respectively.
- The fixed asset for the year 2014 and 2015 are $357,165 and $398,345 respectively.
- The accounts payable for the year 2014 and 2015 are $30,602 and $35,485 respectively.
- The other current liabilities for the year 2014 and 2015 are $15,280 and $20,441 respectively.
- The notes payable for the year 2014 and 2015 are $15,840 and $13,500 respectively.
- The long-term debt for the year 2014 and 2015 are $95,000 and $110,000.
- The common stock and paid in surplus for 2014 is $45,000 and for 2015 is $45,000
- The accumulated retained earnings for 2014 is $223,517 and 2015 is $253,893
- The net income is $50,376.
- The depreciation is $37,053.
- The dividend paid is $20,000.
- The cost of goods sold amounts to $291,090
- The sales is $422,045
- The earnings before interest and taxes is $93,902
- The interest paid is $16,400
- The retained earnings is $30,376
- The taxable income is $77,502
Formula to calculate the inventory turnover ratio:
Compute the inventory turnover ratio:
Hence, the inventory turnover ratio is 8.93 times.
f)
To find: The receivables turnover ratio of Company SG
Introduction:
The process of analyzing and calculating the financial ratios for the evaluation of the performance of the firm and to find the actions that are necessary to improve the firm’s performance is ratio analysis.
Answer to Problem 26QP
The receivables turnover ratio is 23.09 times.
Explanation of Solution
Given information:
The balance sheet of the Company SG shows the following information:
- The total assets for the year 2014 is $425,239 and for 2015 is $478,319
- The total liabilities and equity for the year 2014 is 425,239 and for 2015 is $478,319
- The cash at the beginning and end of the year are $26,450 and $29,106 respectively.
- The accounts receivable for the year 2014 and 2015 are $13,693 and $18,282 respectively.
- The inventory for the year 2014 and 2015 are $27,931 and $32,586 respectively.
- The fixed asset for the year 2014 and 2015 are $357,165 and $398,345 respectively.
- The accounts payable for the year 2014 and 2015 are $30,602 and $35,485 respectively.
- The other current liabilities for the year 2014 and 2015 are $15,280 and $20,441 respectively.
- The notes payable for the year 2014 and 2015 are $15,840 and $13,500 respectively.
- The long-term debt for the year 2014 and 2015 are $95,000 and $110,000.
- The common stock and paid in surplus for 2014 is $45,000 and for 2015 is $45,000
- The accumulated retained earnings for 2014 is $223,517 and 2015 is $253,893
- The net income is $50,376.
- The depreciation is $37,053.
- The dividend paid is $20,000.
- The cost of goods sold amounts to $291,090
- The sales is $422,045
- The earnings before interest and taxes is $93,902
- The interest paid is $16,400
- The retained earnings is $30,376
- The taxable income is $77,502
Formula to calculate the receivables turnover ratio:
Compute the receivables turnover ratio:
Hence, the receivables turnover ratio is 23.09 times.
g)
To find: The total debt ratio of Company SG
Introduction:
The process of analyzing and calculating the financial ratios for the evaluation of the performance of the firm and to find the actions that are necessary to improve the firm’s performance is ratio analysis.
Answer to Problem 26QP
The total debt ratio for 2014 is 0.37 timesand for 2015 is 0.38 times.
Explanation of Solution
Long-term solvency ratios:
Given information:
The balance sheet of the Company SG shows the following information:
- The total assets for the year 2014 is $425,239 and for 2015 is $478,319
- The total liabilities and equity for the year 2014 is 425,239 and for 2015 is $478,319
- The cash at the beginning and end of the year are $26,450 and $29,106 respectively.
- The accounts receivable for the year 2014 and 2015 are $13,693 and $18,282 respectively.
- The inventory for the year 2014 and 2015 are $27,931 and $32,586 respectively.
- The fixed asset for the year 2014 and 2015 are $357,165 and $398,345 respectively.
- The accounts payable for the year 2014 and 2015 are $30,602 and $35,485 respectively.
- The other current liabilities for the year 2014 and 2015 are $15,280 and $20,441 respectively.
- The notes payable for the year 2014 and 2015 are $15,840 and $13,500 respectively.
- The long-term debt for the year 2014 and 2015 are $95,000 and $110,000.
- The common stock and paid in surplus for 2014 is $45,000 and for 2015 is $45,000
- The accumulated retained earnings for 2014 is $223,517 and 2015 is $253,893
- The net income is $50,376.
- The depreciation is $37,053.
- The dividend paid is $20,000.
- The cost of goods sold amounts to $291,090
- The sales is $422,045
- The earnings before interest and taxes is $93,902
- The interest paid is $16,400
- The retained earnings is $30,376
- The taxable income is $77,502
Formula to calculate the total debt ratio:
Compute the total debt ratio:
Hence, the total debt ratio for 2014 is 0.37 times.
Hence, the total debt ratio for 2015 is 0.38 times.
h)
To find: The debt equity ratio of Company SG
Introduction:
The process of analyzing and calculating the financial ratios for the evaluation of the performance of the firm and to find the actions that are necessary to improve the firm’s performance is ratio analysis.
Answer to Problem 26QP
The debt-equity ratio for the year 2014 is 0.58 timesand the debt-equity ratio for the year 2015 is 0.60 times.
Explanation of Solution
Given information:
The balance sheet of the Company SG shows the following information:
- The total assets for the year 2014 is $425,239 and for 2015 is $478,319
- The total liabilities and equity for the year 2014 is 425,239 and for 2015 is $478,319
- The cash at the beginning and end of the year are $26,450 and $29,106 respectively.
- The accounts receivable for the year 2014 and 2015 are $13,693 and $18,282 respectively.
- The inventory for the year 2014 and 2015 are $27,931 and $32,586 respectively.
- The fixed asset for the year 2014 and 2015 are $357,165 and $398,345 respectively.
- The accounts payable for the year 2014 and 2015 are $30,602 and $35,485 respectively.
- The other current liabilities for the year 2014 and 2015 are $15,280 and $20,441 respectively.
- The notes payable for the year 2014 and 2015 are $15,840 and $13,500 respectively.
- The long-term debt for the year 2014 and 2015 are $95,000 and $110,000.
- The common stock and paid in surplus for 2014 is $45,000 and for 2015 is $45,000
- The accumulated retained earnings for 2014 is $223,517 and 2015 is $253,893
- The net income is $50,376.
- The depreciation is $37,053.
- The dividend paid is $20,000.
- The cost of goods sold amounts to $291,090
- The sales is $422,045
- The earnings before interest and taxes is $93,902
- The interest paid is $16,400
- The retained earnings is $30,376
- The taxable income is $77,502
Formula to calculate the debt-equity ratio:
Compute the debt-equity:
Hence, the debt-equity ratio for the year 2014 is 0.58 times.
Hence, the debt-equity ratio for the year 2015 is 0.60 times.
Note: The total debt is calculated by adding the total-long term debt and total current liabilities.
i)
To find: The equity multiplier ratio of Company SG
Introduction:
The process of analyzing and calculating the financial ratios for the evaluation of the performance of the firm and to find the actions that are necessary to improve the firm’s performance is ratio analysis.
Answer to Problem 26QP
The equity multiplier ratio for the year 2014 is 1.58 timesand the equity multiplier ratio for the year 2015 is 1.60 times.
Explanation of Solution
Given information:
The balance sheet of the Company SG shows the following information:
- The total assets for the year 2014 is $425,239 and for 2015 is $478,319
- The total liabilities and equity for the year 2014 is 425,239 and for 2015 is $478,319
- The cash at the beginning and end of the year are $26,450 and $29,106 respectively.
- The accounts receivable for the year 2014 and 2015 are $13,693 and $18,282 respectively.
- The inventory for the year 2014 and 2015 are $27,931 and $32,586 respectively.
- The fixed asset for the year 2014 and 2015 are $357,165 and $398,345 respectively.
- The accounts payable for the year 2014 and 2015 are $30,602 and $35,485 respectively.
- The other current liabilities for the year 2014 and 2015 are $15,280 and $20,441 respectively.
- The notes payable for the year 2014 and 2015 are $15,840 and $13,500 respectively.
- The long-term debt for the year 2014 and 2015 are $95,000 and $110,000.
- The common stock and paid in surplus for 2014 is $45,000 and for 2015 is $45,000
- The accumulated retained earnings for 2014 is $223,517 and 2015 is $253,893
- The net income is $50,376.
- The depreciation is $37,053.
- The dividend paid is $20,000.
- The cost of goods sold amounts to $291,090
- The sales is $422,045
- The earnings before interest and taxes is $93,902
- The interest paid is $16,400
- The retained earnings is $30,376
- The taxable income is $77,502
Formula to calculate the equity multiplier:
Compute the equity multiplier ratio for the year 2015:
Hence, the equity multiplier ratio for the year 2014 is 1.58 times.
Hence, the equity multiplier ratio for the year 2015 is 1.60 times.
j)
To find: The times interest earned of Company SG
Introduction:
The process of analyzing and calculating the financial ratios for the evaluation of the performance of the firm and to find the actions that are necessary to improve the firm’s performance is ratio analysis.
Answer to Problem 26QP
The times interest earned is 5.73 times.
Explanation of Solution
Given information:
The balance sheet of the Company SG shows the following information:
- The total assets for the year 2014 is $425,239 and for 2015 is $478,319
- The total liabilities and equity for the year 2014 is 425,239 and for 2015 is $478,319
- The cash at the beginning and end of the year are $26,450 and $29,106 respectively.
- The accounts receivable for the year 2014 and 2015 are $13,693 and $18,282 respectively.
- The inventory for the year 2014 and 2015 are $27,931 and $32,586 respectively.
- The fixed asset for the year 2014 and 2015 are $357,165 and $398,345 respectively.
- The accounts payable for the year 2014 and 2015 are $30,602 and $35,485 respectively.
- The other current liabilities for the year 2014 and 2015 are $15,280 and $20,441 respectively.
- The notes payable for the year 2014 and 2015 are $15,840 and $13,500 respectively.
- The long-term debt for the year 2014 and 2015 are $95,000 and $110,000.
- The common stock and paid in surplus for 2014 is $45,000 and for 2015 is $45,000
- The accumulated retained earnings for 2014 is $223,517 and 2015 is $253,893
- The net income is $50,376.
- The depreciation is $37,053.
- The dividend paid is $20,000.
- The cost of goods sold amounts to $291,090
- The sales is $422,045
- The earnings before interest and taxes is $93,902
- The interest paid is $16,400
- The retained earnings is $30,376
- The taxable income is $77,502
Formula to calculate the times interest earned ratio:
Compute the times interest earned ratio:
Hence, the times interest earned is 5.73 times.
k)
To find: The cash coverage ratio of Company SG
Introduction:
The process of analyzing and calculating the financial ratios for the evaluation of the performance of the firm and to find the actions that are necessary to improve the firm’s performance is ratio analysis.
Answer to Problem 26QP
The cash coverage ratio is 7.99 times.
Explanation of Solution
Given information:
The balance sheet of the Company SG shows the following information:
- The total assets for the year 2014 is $425,239 and for 2015 is $478,319
- The total liabilities and equity for the year 2014 is 425,239 and for 2015 is $478,319
- The cash at the beginning and end of the year are $26,450 and $29,106 respectively.
- The accounts receivable for the year 2014 and 2015 are $13,693 and $18,282 respectively.
- The inventory for the year 2014 and 2015 are $27,931 and $32,586 respectively.
- The fixed asset for the year 2014 and 2015 are $357,165 and $398,345 respectively.
- The accounts payable for the year 2014 and 2015 are $30,602 and $35,485 respectively.
- The other current liabilities for the year 2014 and 2015 are $15,280 and $20,441 respectively.
- The notes payable for the year 2014 and 2015 are $15,840 and $13,500 respectively.
- The long-term debt for the year 2014 and 2015 are $95,000 and $110,000.
- The common stock and paid in surplus for 2014 is $45,000 and for 2015 is $45,000
- The accumulated retained earnings for 2014 is $223,517 and 2015 is $253,893
- The net income is $50,376.
- The depreciation is $37,053.
- The dividend paid is $20,000.
- The cost of goods sold amounts to $291,090
- The sales is $422,045
- The earnings before interest and taxes is $93,902
- The interest paid is $16,400
- The retained earnings is $30,376
- The taxable income is $77,502
Formula to calculate the cash coverage ratio:
Compute the cash coverage ratio:
Hence, the cash coverage ratio is 7.99 times.
l)
To find: The profit margin of Company SG
Introduction:
The process of analyzing and calculating the financial ratios for the evaluation of the performance of the firm and to find the actions that are necessary to improve the firm’s performance is ratio analysis.
Answer to Problem 26QP
The profit margin is 11.94%.
Explanation of Solution
Profitability ratios:
Given information:
The balance sheet of the Company SG shows the following information:
- The total assets for the year 2014 is $425,239 and for 2015 is $478,319
- The total liabilities and equity for the year 2014 is 425,239 and for 2015 is $478,319
- The cash at the beginning and end of the year are $26,450 and $29,106 respectively.
- The accounts receivable for the year 2014 and 2015 are $13,693 and $18,282 respectively.
- The inventory for the year 2014 and 2015 are $27,931 and $32,586 respectively.
- The fixed asset for the year 2014 and 2015 are $357,165 and $398,345 respectively.
- The accounts payable for the year 2014 and 2015 are $30,602 and $35,485 respectively.
- The other current liabilities for the year 2014 and 2015 are $15,280 and $20,441 respectively.
- The notes payable for the year 2014 and 2015 are $15,840 and $13,500 respectively.
- The long-term debt for the year 2014 and 2015 are $95,000 and $110,000.
- The common stock and paid in surplus for 2014 is $45,000 and for 2015 is $45,000
- The accumulated retained earnings for 2014 is $223,517 and 2015 is $253,893
- The net income is $50,376.
- The depreciation is $37,053.
- The dividend paid is $20,000.
- The cost of goods sold amounts to $291,090
- The sales is $422,045
- The earnings before interest and taxes is $93,902
- The interest paid is $16,400
- The retained earnings is $30,376
- The taxable income is $77,502
Formula to calculate the profit margin ratio:
Compute the profit margin:
Hence, the profit margin is 11.94%.
m)
To find: The return on assets of Company SG
Introduction:
The process of analyzing and calculating the financial ratios for the evaluation of the performance of the firm and to find the actions that are necessary to improve the firm’s performance is ratio analysis.
Answer to Problem 26QP
The return on assets is 0.1194.
Explanation of Solution
Given information:
The balance sheet of the Company SG shows the following information:
- The total assets for the year 2014 is $425,239 and for 2015 is $478,319
- The total liabilities and equity for the year 2014 is 425,239 and for 2015 is $478,319
- The cash at the beginning and end of the year are $26,450 and $29,106 respectively.
- The accounts receivable for the year 2014 and 2015 are $13,693 and $18,282 respectively.
- The inventory for the year 2014 and 2015 are $27,931 and $32,586 respectively.
- The fixed asset for the year 2014 and 2015 are $357,165 and $398,345 respectively.
- The accounts payable for the year 2014 and 2015 are $30,602 and $35,485 respectively.
- The other current liabilities for the year 2014 and 2015 are $15,280 and $20,441 respectively.
- The notes payable for the year 2014 and 2015 are $15,840 and $13,500 respectively.
- The long-term debt for the year 2014 and 2015 are $95,000 and $110,000.
- The common stock and paid in surplus for 2014 is $45,000 and for 2015 is $45,000
- The accumulated retained earnings for 2014 is $223,517 and 2015 is $253,893
- The net income is $50,376.
- The depreciation is $37,053.
- The dividend paid is $20,000.
- The cost of goods sold amounts to $291,090
- The sales is $422,045
- The earnings before interest and taxes is $93,902
- The interest paid is $16,400
- The retained earnings is $30,376
- The taxable income is $77,502
Formula to calculate the Return on assets (ROA):
Compute the Return on assets (ROA):
Hence, the return on assets is 0.1194 or 11.94%.
n)
To find: The return on equity of Company SG
Introduction:
The process of analyzing and calculating the financial ratios for the evaluation of the performance of the firm and to find the actions that are necessary to improve the firm’s performance is ratio analysis.
Answer to Problem 26QP
The return on equity is 0.1685.
Explanation of Solution
Given information:
The balance sheet of the Company SG shows the following information:
- The total assets for the year 2014 is $425,239 and for 2015 is $478,319
- The total liabilities and equity for the year 2014 is 425,239 and for 2015 is $478,319
- The cash at the beginning and end of the year are $26,450 and $29,106 respectively.
- The accounts receivable for the year 2014 and 2015 are $13,693 and $18,282 respectively.
- The inventory for the year 2014 and 2015 are $27,931 and $32,586 respectively.
- The fixed asset for the year 2014 and 2015 are $357,165 and $398,345 respectively.
- The accounts payable for the year 2014 and 2015 are $30,602 and $35,485 respectively.
- The other current liabilities for the year 2014 and 2015 are $15,280 and $20,441 respectively.
- The notes payable for the year 2014 and 2015 are $15,840 and $13,500 respectively.
- The long-term debt for the year 2014 and 2015 are $95,000 and $110,000.
- The common stock and paid in surplus for 2014 is $45,000 and for 2015 is $45,000
- The accumulated retained earnings for 2014 is $223,517 and 2015 is $253,893
- The net income is $50,376.
- The depreciation is $37,053.
- The dividend paid is $20,000.
- The cost of goods sold amounts to $291,090
- The sales is $422,045
- The earnings before interest and taxes is $93,902
- The interest paid is $16,400
- The retained earnings is $30,376
- The taxable income is $77,502
Formula to calculate the Return on equity (ROE):
Compute the Return on equity (ROE):
Hence, the return on equity is 0.1685 or 16.85%.
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Chapter 3 Solutions
Fundamentals of Corporate Finance
- The most recent financial statements for Mandy Company are shown here: Income Statement Balance Sheet Sales $ 19,200 Current assets $ 11,760 Debt $ 15,880 Costs 13,050 Fixed assets 27,450 Equity 23,330 Taxable income $ 6,150 Total $ 39,210 Total $ 39,210 Taxes (24%) 1,476 Net income $ 4,674 Assets and costs are proportional to sales. Debt and equity are not. The company maintains a constant 45 percent dividend payout ratio. What is the internal growth rate? (Do not round intermediate calculations and enter your answer as a percent rounded 2 decimal places, e.g., 32.16.)arrow_forward1. Comprehensive analysis: The balance sheets and the profit and loss accounts of Maharaja Synthetics Limited for the last two years are given as follows: Particulars (Rs.in Thousands) 2017 2018 Net sales Other Income Total Income 788, 1 10 15,370 803,480 672,040 18,020 690,060 473,290 118,190 Cost of goods sold Other operating expenses Depreciation Interest Profit before tax 520,460 131,970 22,260 20,140 32,860 24,380 95,930 54,060 Тахек s 28,780 67,150 16,788 16,218 Profit after tax 37,842 Dividend 9,460 Retained earnings 50,362 28,382 Balance Sheet as on 31st March Particulars Assets Non-current assets Cash and bank Trade receivables Inventories Total Current assets 2018 2017 223,200 24,202 175,960 21,200 91,160 68,900 130,210 111,300 201.400 377,360 245.572 Total 468,772 Liabilities Shareholders fund (Note 1) 232,682 182,320 106,000 Long term debt Short term debt Trade payables Total current liabilities 137,800 58,300 39,990 98,290 58,300 30.740 89.040 377,360 Total 468,772…arrow_forwardIncome Statement Balance Sheet Current Current Sales $9,300 $ 4,050 $ 2,625 assets liabilities Long-term debt Costs 6,550 Fixed assets 9,300 4,190 Taxable $2,750 Equity 6,535 income Taxes (22%) 605 Total $13,350 Total $13,350 Net income $ 2,145 Assets, costs, and current liabilities are proportional to sales. Long-term debt and equity are not. The company maintains a constant 44 percent dividend payout ratio. As with every other firm in its industry, next year's sales are projected to increase by exactly 17 percent. What is the external financing needed? External financing neededarrow_forward
- Use the following excerpts from Yardley Company’s financial information. 2018 IncomeStatement BalanceSheets Sales $455,000 Cost of Goods Sold (221,500) Operating Expenses, other than Depreciation Expense (60,600) Depreciation Expense (21,000) Gain on Sale of Plant Assets 23,500 Net Income $175,400 Dec. 31,2018 Cash $323,450 Accounts Receivable 39,750 Inventory 31,000 Accounts Payable 17,550 Accured Liabilities 3,500 Dec. 31, 2017 Cash $133,500 Accounts Receivable 36,500 Inventory 35,000 Accounts Payable 19,550 Accured Liabilities 2,200 Additional Information: Plant assets were sold for $40,000; book value $16,500. Dividends of $23,000 were declared and paid. Prepare a statement of cash flows (indirect method) for the year 2018. Use the minus sign to indicate cash outflows, a…arrow_forwardThe most recent financial statements for Bello Co. are shown here: Income Statement Balance Sheet Sales $13,000 Current assets $28,032 Debt $27,628 Costs 7,800 Fixed assets 19,616 Equity 20,020 Taxable income $5,200 Total $47,648 Total $47,648 Taxes (22%) 1,144 Net income $4,056 Assets and costs are proportional to sales. Debt and equity are not. The company maintains a constant 36 percent dividend payout ratio. What is the sustainable growth rate?arrow_forwardSkysong Inc., a greeting card company, had the following statements prepared as of December 31, 2020. SKYSONG INC. COMPARATIVE BALANCE SHEET AS OF DECEMBER 31, 2020 AND 2019 12/31/20 12/31/19 Cash $6,100 $6.900 Accounts receivable 61.900 50,500 Short-term debt investments (available-for-sale) 34,800 18,200 Inventory 39,900 59,800 Prepaid rent 4,900 4.000 Equipment 155,500 131,200 Accumulated depreciation-equipment (34,800 ) (25,300 ) Copyrights 45,700 50.200 Total assets $314,000 $295,500 Accounts payable $46,200 $39,700 Income taxes payable 4,000 6,100 Salaries and wages payable 7,900 4,000 Short-term loans payable 7,900 10,000 Long-term loans payable 59.800 68,600 Common stock, $10 par 100,000 100,000 Contributed capital, common stock 30,000 30,000 Retained earnings 58,200 37,100 Total liabilities & stockholders' equity $314,000 $295,500arrow_forward
- Financial information for Powell Panther Corporation is shown below: Powell Panther Corporation: Income Statements for Year Ending December 31 (Millions of Dollars) 2018 2017 Sales $ 1,800.0 $ 1,500.0 Operating costs excluding depreciation and amortization 1,395.0 1,275.0 EBITDA $ 405.0 $ 225.0 Depreciation and amortization 43.0 39.0 Earnings before interest and taxes (EBIT) $ 362.0 $ 186.0 Interest 40.0 33.0 Earnings before taxes (EBT) $ 322.0 $ 153.0 Taxes (40%) 128.8 61.2 Net income $ 193.2 $ 91.8 Common dividends $ 174.0 $ 73.0 Powell Panther Corporation: Balance Sheets as of December 31 (Millions of Dollars) 2018 2017 Assets Cash and equivalents $ 23.0 $ 18.0 Accounts receivable 248.0 225.0 Inventories 396.0 360.0 Total current assets $ 667.0 $ 603.0 Net plant and equipment 429.0 390.0 Total assets $ 1,096.0 $ 993.0 Liabilities and Equity Accounts…arrow_forwardFootfall Manufacturing Ltd. reports the following financial information at the end of the current year Net Sales $100,000 Debtor's turnover ratio (based on net sales) 2 Inventory turnover ratio 1.25 Fixed assets turnover ratio 0.8 Debt to assets ratio 0.6 Net profit margin Gross profit margin 5% 25% Return on investment 2% Use the given information to fill out the templates for income statement and balance sheet given below. Income Statement of FdfalOfanufacturing Ltd. for the year ending December 31, 20XX (in S) Sales 100,000 Cost of goods sold Gross profit Other expenses Earnings before tax Таx @ 50% Earnings after taxarrow_forwardSelected balance sheet and income statement information for Home Depot follows. $ millions Jan. 31, 2016 Feb. 01, 2015 Operating assets $40,683 $38,573 Nonoperating assets 2,266 1,773 Total assets 42,949 40,346 Operating liabilities 15,043 13,552 Nonoperating liabilities 21,275 17,157 Total liabilities 36,318 30,709 Sales 89,234 Net operating profit before tax (NOPBT) 12,124 Nonoperting expense before tax 803 Tax expense 4,001 Net income 7,320 Round answers to two decimal places (ex: 0.12345 = 12.35%). a. Compute return on net operating assets (RNOA). Assume a statutory tax rate of 37%.Answer% b. Disaggregate RNOA into components of profitability and productivity and show that the product of the two components equals RNOA. Assume a statutory tax rate of 37%.NOPM Answer%NOAT Answerarrow_forward
- Use the following tables to answer the question: LOGIC COMPANY Income Statement For years ended December 31, 2016 and 2017 (values in $) 2016 2017 Gross sales 19,800 15,600 Sales returns and allowances 900 100 Net sales 18,900 15,500 COGS 11,800 8,800 Gross profit 7,100 6,700 Depreciation 780 640 Selling and administrative expenses 2,800 2,400 Research 630 540 Miscellaneous 440 340 Total operating expenses 4,650 3,920 Income before interest and taxes 2,450 2,780 Interest expense 640 540 Income before taxes 1,810 2,240 Provision for taxes 724 896 LOGIC COMPANY Balance Sheet For years ended December 31, 2016 and 2017 (values in $) 2016 2017 Current assets 12,300 9,400 Accounts receivable 16,900 12,900 Merchandise inventory 8,900 14,400 Prepaid expenses 24,400 10,400 Total current assets 62,500 47,100 Building (net) 14,900 11,400 Land 13,900 9,400 Total plant and equipment 28,800 20,800 Total assets 91,300 67,900 Accounts payable 13,400 7,400 Salaries payable 7,500 5,400 Total current…arrow_forwardHere are simplified financial statements for Watervan Corporation: INCOME STATEMENT (Figures in $ millions) Net sales $ 893.00 Cost of goods sold 753.00 Depreciation 43.00 Earnings before interest and taxes (EBIT) $ 97.00 Interest expense 24.00 Income before tax $ 73.00 Taxes 15.33 Net income $ 57.67 BALANCE SHEET (Figures in $ millions) End of Year Start of Year Assets Current assets $ 381 $ 336 Long-term assets 282 234 Total assets $ 663 $ 570 Liabilities and shareholders’ equity Current liabilities $ 206 $ 169 Long-term debt 120 133 Shareholders’ equity 337 268 Total liabilities and shareholders’ equity $ 663 $ 570 The company’s cost of capital is 8.5%. a. Calculate Watervan’s economic value added (EVA). (Do not round intermediate calculations. Enter your answer in millions…arrow_forwardWhat is companies net income? The following information is given to you relating to the operations of PrincehallCorporation: The income tax rate is 40%. Net sales $11,862 Cost of sales 8,321 Gross margin ? Selling, general, and administrative expenses $ 2,743 Depreciation, amortization, and asset write-offs 278 Total operating expenses: ? Income from operations : ? Interest expense 91 Interest and other income 11 Earnings before income taxes: ? Income taxes ? Net earnings: ? Determine the nest income of the company.arrow_forward
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