Here are simplified financial statements for Phone Corporation in a recent year: INCOME STATEMENT (Figures in $ millions) Net...

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Finance

Here are simplified financial statements for Phone Corporationin a recent year:

INCOME STATEMENT
(Figures in $ millions)
  Net sales
$ 13,600
  Cost of goods sold
4,310
  Other expenses
4,162
  Depreciation
2,668
  Earnings before interest and taxes (EBIT)
$ 2,460
  Interest expense
710
  Income before tax
$ 1,750
  Taxes (at 30%)
525
  Net income
$ 1,225
  Dividends
$ 906

BALANCE SHEET
(Figures in $ millions)
End of Year
Start of Year
  Assets
     Cash and marketable securities
$
94
$
163
     Receivables
2,632
2,590
     Inventories
212
263
     Other current assets
892
957
        Total currentassets
$
3,830
$
3,973
     Net property, plant, andequipment
20,023
19,965
     Other long-term assets
4,266
3,820
        Total assets
$
28,119
$
27,758
  Liabilities and shareholders’equity
     Payables
$
2,614
$
3,090
     Short-term debt
1,444
1,598
     Other current liabilities
836
812
        Total currentliabilities
$
4,894
$
5,500
     Long-term debt and leases
5,773
5,938
     Other long-term liabilities
6,228
6,199
     Shareholders’ equity
11,224
10,121
        Totalliabilities and shareholders’ equity
$
28,119
$
27,758

Calculate the following financial ratios for Phone Corporation:(Use 365 days in a year. Do not round intermediatecalculations. Round your percentage answers "Return on equity","Return on assets", Return on capital" and "Operating profitmargin" to 2 decimal places and the rest to 2 decimalplaces.)

a.
Return on equity (Use average equity.)
%
b.
Return on assets (Use after-tax operating income and averageassets.)
%
c.
Return on capital (Use after-tax operating income and averagecapital.)
%
d.
Days in inventory (Use beginning inventory.)
days
e.
Inventory turnover (Use beginning inventory.)
f.
Average collection period (Use beginning receivables.)
days
g.
Operating profit margin (Use after-tax operating income.)
%
h.
Long-term debt ratio (Use end of year values.)
i.
Total debt ratio (Use end of year values.)
j.
Times interest earned
k.
Cash coverage ratio
l.
Current ratio (Use end of year values.)
m.
Quick ratio (Use end of year values.)

Answer & Explanation Solved by verified expert

3.6 Ratings (553 Votes)

Answer a Average Equity 11224 10121 2 Average Equity 1067250 Return on Equity Net Income Average Equity Return on Equity 1225 1067250 Return on Equity 1148 Answer b Aftertax Operating Income EBIT 1 tax Aftertax See Answer

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Transcribed Image Text

Here are simplified financial statements for Phone Corporationin a recent year: INCOME STATEMENT(Figures in $ millions) Net sales$ 13,600 Cost of goods sold4,310 Other expenses4,162 Depreciation2,668 Earnings before interest and taxes (EBIT)$ 2,460 Interest expense710 Income before tax$ 1,750 Taxes (at 30%)525 Net income$ 1,225 Dividends$ 906 BALANCE SHEET(Figures in $ millions)End of YearStart of Year Assets Cash and marketable securities$94$163 Receivables2,6322,590 Inventories212263 Other current assets892957 Total currentassets$3,830$3,973 Net property, plant, andequipment20,02319,965 Other long-term assets4,2663,820 Total assets$28,119$27,758 Liabilities and shareholders’equity Payables$2,614$3,090 Short-term debt1,4441,598 Other current liabilities836812 Total currentliabilities$4,894$5,500 Long-term debt and leases5,7735,938 Other long-term liabilities6,2286,199 Shareholders’ equity11,22410,121 Totalliabilities and shareholders’ equity$28,119$27,758 Calculate the following financial ratios for Phone Corporation:(Use 365 days in a year. Do not round intermediatecalculations. Round your percentage answers "Return on equity","Return on assets", Return on capital" and "Operating profitmargin" to 2 decimal places and the rest to 2 decimalplaces.) a.Return on equity (Use average equity.)%b.Return on assets (Use after-tax operating income and averageassets.)%c.Return on capital (Use after-tax operating income and averagecapital.)%d.Days in inventory (Use beginning inventory.)dayse.Inventory turnover (Use beginning inventory.)f.Average collection period (Use beginning receivables.)daysg.Operating profit margin (Use after-tax operating income.)%h.Long-term debt ratio (Use end of year values.)i.Total debt ratio (Use end of year values.)j.Times interest earnedk.Cash coverage ratiol.Current ratio (Use end of year values.)m.Quick ratio (Use end of year values.)

INCOME STATEMENT (Figures in $ millions)
Net sales	$ 13,600
Cost of goods sold	4,310
Other expenses	4,162
Depreciation	2,668

Earnings before interest and taxes (EBIT)	$ 2,460
Interest expense	710

Income before tax	$ 1,750
Taxes (at 30%)	525

Net income	$ 1,225
Dividends	$ 906

BALANCE SHEET
(Figures in $ millions)
	End of Year		Start of Year
Assets
Cash and marketable securities	$	94	$	163
Receivables		2,632		2,590
Inventories		212		263
Other current assets		892		957

Total currentassets	$	3,830	$	3,973
Net property, plant, andequipment		20,023		19,965
Other long-term assets		4,266		3,820

Total assets	$	28,119	$	27,758

Liabilities and shareholders’equity
Payables	$	2,614	$	3,090
Short-term debt		1,444		1,598
Other current liabilities		836		812

Total currentliabilities	$	4,894	$	5,500
Long-term debt and leases		5,773		5,938
Other long-term liabilities		6,228		6,199
Shareholders’ equity		11,224		10,121

Totalliabilities and shareholders’ equity	$	28,119	$	27,758






a.	Return on equity (Use average equity.)	%
b.	Return on assets (Use after-tax operating income and averageassets.)	%
c.	Return on capital (Use after-tax operating income and averagecapital.)	%
d.	Days in inventory (Use beginning inventory.)	days
e.	Inventory turnover (Use beginning inventory.)
f.	Average collection period (Use beginning receivables.)	days
g.	Operating profit margin (Use after-tax operating income.)	%
h.	Long-term debt ratio (Use end of year values.)
i.	Total debt ratio (Use end of year values.)
j.	Times interest earned
k.	Cash coverage ratio
l.	Current ratio (Use end of year values.)
m.	Quick ratio (Use end of year values.)