111) The records of Washington Company showed the following:
Average
Assets
$330,000
Revenues
$100,000
Average
Liabilities
130,000
Operating
Expenses**
(81,000)
Average
Stockholders’
equity*
200,000
Interest
expense
(2,000)
Net income
$17,000
*10,000 shares outstanding at 1/1 and at 12/31; current market price, $30
**Including income tax; income tax rate is 30%
Calculate each of the following ratios:
A. Return on assets
B. Return on equity
C. Net profit margin
D. Earnings per share
59
112) The 2019 financial statements of Companies Y and Z showed the following:
Item
Company
Y
Net sales
revenue
$150,000
Net profit
margin
6%
Total average
assets
$40,000
Total average
stockholders’
equity
$22,000
Cash flows from
operating
activities
$4,800
Part A: For each company, calculate the items listed in the following tabulation.
Item
Company
Y
Z
1.
Net income
2.
Return on assets
3.
Return on equity
4.
Quality of income
Part B: Assuming both Company Y and Company Z are in the same industry, which company (Y
or Z) appears to be the better investment and why?
60
113) The following data were shown in the records of Victoria Company at the end of 2019:
Quick assets
$180,000
Current assets
225,000
Average net receivables
10,000
Average inventory
42,000
Current liabilities
50,000
Net credit sales
120,000
Cost of goods sold
84,000
Assume 365 days in the year
Calculate each of the following ratios. Round your answers to one decimal place.
A. Quick ratio
B. Current ratio
C. Receivable turnover ratio
D. Inventory turnover ratio
E. Average days to collect receivables
F. Average days to sell inventory
62
114) The following data were available for Holiday Company:
Sales revenue, $225,000 (including $75,000 cash sales)
Cost of goods sold, $175,000
Average balance in inventory, $20,000
Average balance in accounts receivable, $20,000
Assume 365 days in the year
Calculate each of the following ratios. Round your answers to two decimal places.
A. Inventory turnover ratio
B. Average days to sell inventory
C. Receivable turnover ratio
D. Average days to collect receivables
63
115) Compete Corporation reported a quick ratio of 1.75, current assets of $50,000, and a current
ratio of 2.
A. Calculate the total amount of quick assets.
B. What is another name for the quick ratio?
C. Describe what type of assets are considered quick assets and give some examples.
D. How does the quick ratio compare to the current ratio?
116) The following data were reported by Universe Company at year-end:
Total assets
$525,000
Quick assets
105,000
Noncurrent assets
375,000
Current liabilities
75,000
Long-term liabilities
75,000
Common stock (par $10)
170,000
Total stockholders’ equity
375,000
Calculate each of the following ratios:
A. Debt-to-equity
B. Current ratio
C. Quick ratio
D. Which of the above ratios, if any, are liquidity ratios?
E. Which of the above ratios, if any, are profitability ratios?
65
117) Walkers World Company gathered the following information for 2019:
Total sales revenue (65% on credit)
$432,000
Cost of goods sold
231,000
Sales returns and allowances (on credit)
44,000
Accounts receivable at end of 2019
($30,000 increase during 2019)
100,000
Allowance for doubtful accounts:
Beginning of 2019
5,000
End of 2019
7,000
Merchandise inventory at end of 2019
($10,000 decrease during 2019)
28,000
Assume 365 days in the year.
Calculate each of the following ratios. Round all dollar amounts to whole dollars and all other
calculations to two decimal places.
A. Receivable turnover ratio
B. Average days to collect receivables
C. Inventory turnover ratio
D. Average number of days to sell inventory
66
118) Indicate the effect of each item on the particular ratio of that row of the schedule. In the last
column of the schedule, place the answer of the effect of the item on the ratio. Use the letter I for
increase in the ratio, D for decrease in the ratio, and N for no effect on the ratio. Each item is
independent of the others.
Ratio
Ratio Value
Before the
Item
Occurred
Item
I, D, or N
A.
Current
ratio
3.0
Borrowed money by issuing bonds that
mature at the end of 15 years.
B.
Quick
1.0
Returned damaged inventory to the supplier.
The goods were not yet paid for.
C.
Receivable
turnover
12 times per
year
At the beginning of the current year sales
terms were changed from terms of “net due
in 30 days” to “net due in 60 days”.
D.
Earnings
per share
$2.00
Issued a 50% stock dividend.
E.
Current
ratio
4.0
Sold a short-term investment at a gain.
F.
Fixed asset
turnover
1.4
Sold a building at a loss.
G.
Net profit
margin
.25
A customer returned goods and received a
$1,000 credit on account. The goods had
been sold at a 30% gross profit percentage.
68
119) Longhorn Company reported the following data at year-end:
Total stockholders’ equity
$200,000
Current liabilities
75,000
Total assets
350,000
Current assets
80,000
Common stock (par $10)
125,000
Calculate each of the following ratios. Round your answers to two decimal places.
A. Debt-to-equity ratio
B. Current ratio
69
120) Carolina Company computed the following ratios for a two-year period:
Ratio
2018
2019
1.
Current ratio
1.3
.6
2.
Return on equity
25%
16%
3.
Quality of income
1.7
.5
4.
Cash coverage ratio
346
122
5.
Net profit margin
6%
4%
A. Comment on the trend of each of the ratios from 2018 to 2019. State concerns or possible
implications brought to light by each ratio.
B. State an overall opinion of the company’s near future with suggestions for improvement.
121) The following financial data are available for Murphy Company:
Operating income
$236,500
Net income
196,300
Earnings per share
2.45
Dividends paid per share
1.25
Average common stockholders’ equity
985,000
Average total assets
1,870,000
Current market price per share
24.50
Book value per share
12.30
Calculate each of the following ratios. Round your answers to two decimal places.
A. Return on equity
B. Price/earnings ratio
C. Dividend yield
71
122) The following data were reported for Favre Company:
Net income
$275,000
Total dividends declared and paid
on common stock
$0.60 per
share
Common stock, par $10
$1,750,000
Market price
$20.00 per
share
Cash flows from operating
activities
$280,000
Calculate each of the following ratios. Round your answers to two decimal places.
A. Dividend yield
B. Price/earnings ratio
C. Quality of income
72
123) Polk Corporation reported the following information related to its common stock (par $10)
outstanding and net income:
Total stockholders’ equity (no preferred
stock)
$125,000
Current market price per share of
common stock
$40.00
Dividends declared and paid during the
year
$10,000
Balance in the common stock account
$40,000
Net income
$35,000
Calculate each of the following ratios. Round your answers to two decimal places.
A. Price/earnings ratio
B. Dividend yield
73
124) MNF Corporation gathered the following data at the end of the accounting period,
December 31, 2019:
Net income
$60,000
Net sales revenue
$1,200,000
Interest expense
$25,000
Total average liabilities
$200,000
Total average stockholders’ equity
(50,000 shares outstanding)
$300,000
Total dividends declared and paid
during 2019
$22,500
Market price per share of stock at year
end
$9.00
Average income tax rate
40%
Part 1: Calculate each of the following ratios:
A. Net profit margin
B. Return on equity
C. Earnings per share
D. Dividend yield ratio
E. Price/earnings ratio
F. Return on assets