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Selected year-end and financial statement of Cobalt Corporation follow. (All sales were on credit; Selected balance sheet amount at December 31, 2014, inventory,$48,900, total assets &189,400; common stock &90,000; and retrained earning, $22,748.)
Required
Compute the following; (1)
Round to one decimal places; for part 6, round to two decimals.
(1)
Introduction:
Liquidity or short-term ratios determines the ability of a firm to pay its current obligations. A good liquidity ration states that the company has liquid assets which can be easily convertible into cash. It includes current ratio, quick ratio etc.
To calculate:
Current ratio.
Answer to Problem 4PSA
Current ratio is 3.62:1
Explanation of Solution
= $86,900
= $24,000
= 3.62:1
(2)
Introduction:
Liquidity or short-term ratios determines the ability of a firm to pay its current obligations. A good liquidity ration states that the company has liquid assets which can be easily convertible into cash. It includes current ratio, quick ratio etc.
To calculate:
Acid-test ratio.
Answer to Problem 4PSA
Acid-test ratio is 2.2:1
Explanation of Solution
= 2.2:1
(3)
Introduction:
Days sales uncollected ratio helps the creditors and investors to measure the time in which company collects its account receivable.
To calculate:
Days sales uncollected.
Answer to Problem 4PSA
Days sales uncollected = 24 days
Explanation of Solution
= 24 days
(4)
Introduction:
Inventory turnover ratio measures how many times inventory is sold during a period.
To calculate:
Inventory turnover ratio.
Answer to Problem 4PSA
Inventory-turnover ratio is 7.3 times.
Explanation of Solution
= $40,525
= 7.3 times
(5)
Introduction:
Days sales in inventory calculates the time period which company takes to convert its inventory into sales.
To calculate:
Days sales in inventory.
Answer to Problem 4PSA
Days sales in inventory = 50 days
Explanation of Solution
= 50 days.
(6)
Introduction:
Debt-equity ratio measures the proportion of debt and equity in the capital structure.
To calculate:
Debt to equity ratio.
Answer to Problem 4PSA
Debt to equity ratio is 1.7:1
Explanation of Solution
= $87,400:
= $152,800
= 1.7:1
(7)
Introduction:
Time interest earned ratio measures the amount of income that will be required for for covering the interest expenses in the future.
To calculate:
Time interest earned.
Answer to Problem 4PSA
Time interest earned= 11.8
Explanation of Solution
= 11.8
(8)
Introduction:
Profit margin ratio is calculated by dividing net income by the net sales.
To calculate:
Profit margin ratio.
Answer to Problem 4PSA
Profit margin ratio is 6.4%
Explanation of Solution
= 6.4%
(9)
Introduction:
Asset turnover ratio calculates the ability of a company to generate sales with the total assets.
To calculate:
Asset-turnover ratio.
Answer to Problem 4PSA
Asset-turnover ratio = 1.8
Explanation of Solution
= 1.8:
(10)
Introduction:
Return on total asset is a ratio that calculated by dividing earning before income tax by total assets.
To calculate:
Return on total asset.
Answer to Problem 4PSA
Return on total asset is $0.18
Explanation of Solution
= $0.18
= $44,550
(11)
Introduction:
Return on common stockholder’s equity is calculated by dividing net income by shareholder’s equity. It helps in measuring the financial performance of a company.
To calculate:
Return on common stockholder’s equity.
Answer to Problem 4PSA
Return on common stockholder’s equity is $0.19
Explanation of Solution
= $0.19:
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Chapter 13 Solutions
MANAGERIAL ACCOUNTING FUND. W/CONNECT
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Managerial Accounting: The Cornerstone of Busines...AccountingISBN:9781337115773Author:Maryanne M. Mowen, Don R. Hansen, Dan L. HeitgerPublisher:Cengage Learning