Table 3
Financial Data for Dooley Sportswear December 31, 2013
Inventory $206,250
Long-term debt 300,000
Interest expense 5,000
Accumulated depreciation 442,500
Cash 180,000
Net sales (all credit) 1,500,000
Common stock 800,000
Accounts receivable 225,000
Operating expenses 525,000
Notes payable-current 187,500
Cost of goods sold 937,500
Plant and equipment 1,312,500
Accounts payable 168,750
Marketable securities 95,000
Prepaid insurance 80,000
Accrued wages 65,000
Retained earnings-current-year ?
Federal income taxes 5,750
95) From the information presented in Table 3, calculate the following financial ratios for the Dooley Sportswear Company.
current ratio operating profit margin
acid test ratio net profit margin
average collection period total tangible asset turnover
inventory turnover times interest earned
gross profit margin
Answer:
Current ratio = ($180,000 + $95,000 + $225,000 + $206,250 + $80,000)/($168,750 + $187,500 + $65,000) = ($786,250/$421,250) = 1.87
Acid test ratio = ($180,000 + $95,000 + $225,000 + $80,000)/($168,750 + $187,500 + $65,000) = ($580,000/$421,250) = 1.38
Average collection period = ($225,000)/($1,500,000/360 days) = 54 days
Inventory turnover = ($937,500/$206,250) = 4.55
Gross profit margin = ($562,500/$1,500,000) = 0.375
Operating profit margin = ($37,500/$1,500,000) = 0.025
Net profit margin = ($26,750/$1,500,000) = 0.0178
Total asset turnover = ($1,500,000/$1,656,250) = 0.906
Times interest earned = ($37,500/$5,000) = 7.5 times
Table 4
Hokie Corporation Comparative Balance Sheet
For the Years Ending March 31, 2013 and 2014
(Millions of Dollars)
Assets 2013 2014
Current assets:
Cash $2 $10
Accounts receivable 16 10
Inventory 22 26
Total current assets $40 $46
Gross fixed assets: $120 $124
Less accumulated depreciation 60 64
Net fixed assets 60 60
Total assets $100 $106
Liabilities and Owners' Equity
Current liabilities:
Accounts payable $16 $18
Notes payable 10 10
Total current liabilities $26 $28
Long-term debt 20 18
Owners' equity:
Common stock 40 40
Retained earnings 14 20
Total liabilities and owners' equity $100 $106
Hokie had net income of $26 million for 1996 and paid total cash dividends of $20 million to their common stockholders.
Calculate the following financial ratios for the Hokie Corporation using the information given in Table 4 and 2014 information.
current ratio
acid test ratio
debt ratio
long-term debt to total capitalization
return on total assets
return on common equity
Answer:
Current ratio = ($46/$28) = 1.64
Acid test ratio = ($20/$28) = 0.71
Debt ratio = ($46/$106) = 0.43
Long-term debt to total capitalization = ($18/$78) = 0.23
Return on total assets = ($26/$106) = 0.25
Return on common equity = ($26/$60) = 0.43
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