Selected year-end financial statements of Cabot Corporation follow.(All sales were on credit; selected balance...

Free

60.1K

Verified Solution

Question

Accounting

Selected year-end financial statements of Cabot Corporation follow.(All sales were on credit; selected balance sheet amounts atDecember 31, 2016, were inventory, $52,900; total assets, $199,400;common stock, $89,000; and retained earnings, $45,471.)
CABOT CORPORATION
Income Statement
For Year Ended December 31, 2017
Sales $454,600
Cost of goods sold 297,550
Gross profit 157,050
Operating expenses 99,500
Interest expense 4,500
Income before taxes 53,050
Income taxes 21,371
Net income $31,679
CABOT CORPORATION
Balance Sheet
December 31, 2017
Assets Liabilities and Equity
Cash $20,000 Accounts payable $17,500
Short-term investments 9,000 Accrued wages payable 4,800
Accounts receivable, net 31,800 Income taxes payable 4,000
Notes receivable (trade)* 6,000
Merchandise inventory 32,150 Long-term note payable, secured by mortgage on plant assets 63,400
Prepaid expenses 2,600 Common stock 89,000
Plant assets, net 154,300 Retained earnings 77,150
Total assets $255,850 Total liabilities and equity $255,850

* These are short-term notes receivable arising from customer(trade) sales.

Required:
Compute the following: (1) current ratio, (2) acid-test ratio, (3)days' sales uncollected, (4) inventory turnover, (5) days' sales ininventory, (6) debt-to-equity ratio, (7) times interest earned, (8)profit margin ratio, (9) total asset turnover, (10) return on totalassets, and (11) return on common stockholders' equity.(Do not round intermediate calculations.)

CABOT CORPORATION
Income Statement
For Year Ended December 31, 2017
Sales	$454,600
Cost of goods sold	297,550
Gross profit	157,050
Operating expenses	99,500
Interest expense	4,500
Income before taxes	53,050
Income taxes	21,371
Net income	$31,679

CABOT CORPORATION
Balance Sheet
December 31, 2017
Assets	Liabilities and Equity
Cash	$20,000	Accounts payable	$17,500
Short-term investments	9,000	Accrued wages payable	4,800
Accounts receivable, net	31,800	Income taxes payable	4,000
Notes receivable (trade)*	6,000
Merchandise inventory	32,150	Long-term note payable, secured by mortgage on plant assets	63,400
Prepaid expenses	2,600	Common stock	89,000
Plant assets, net	154,300	Retained earnings	77,150
Total assets	$255,850	Total liabilities and equity	$255,850

Answer & Explanation Solved by verified expert

4.0 Ratings (735 Votes)

Type of Ratio	Formula	Workings	Ratio
Current Ratio	Current Assets/ Current Liabilities	101,550/26,300	3.86 : 1
Acid test ratio	Liquid assets/ Current Liabilities	66,800/26,300	2.54 : 1
Days sales uncollected	Accounts receivable/ Net sales*365	37,800/454,600*365	30.35days
Inventory turnover	Cost of goods sold/ Average inventory	297,550/ {(52,900+32,150)/2} =297,550/42,525	7 times
Days sales in inventory	365/ Inventory turnover ratio	365/ 7	52.14days
Debt to equity ratio	Debt/ Shareholder’s equity	63,400/ 166,150	38.16%
Times Interest earned ratio	EBIT/ Interest expenses	57,550/4,500	12.79 times
Profit margin ratio	Net income/ Net Sales	31,679/454,600	6.97%
Asset turnover	Net sales/ Average total assets	454,600/{(199400+255850)/2} = 454,600/227625	1.997 times
Return on assets	Net Income/ Average Total Assets	31,679/ 227,625	13.92%
Return on common stockholder’s equity	Net income/ Average common stock holder’s equity	31,679/{(89000+45471+89000+77150)/2} =14900/150,311	9.91%

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:

Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!

Become a Member

Transcribed Image Text

In: AccountingSelected year-end financial statements of Cabot Corporation follow.(All sales were on credit; selected balance sheet...Selected year-end financial statements of Cabot Corporation follow.(All sales were on credit; selected balance sheet amounts atDecember 31, 2016, were inventory, $52,900; total assets, $199,400;common stock, $89,000; and retained earnings, $45,471.)CABOT CORPORATIONIncome StatementFor Year Ended December 31, 2017Sales$454,600Cost of goods sold297,550Gross profit157,050Operating expenses99,500Interest expense4,500Income before taxes53,050Income taxes21,371Net income$31,679CABOT CORPORATIONBalance SheetDecember 31, 2017AssetsLiabilities and EquityCash$20,000Accounts payable$17,500Short-term investments9,000Accrued wages payable4,800Accounts receivable, net31,800Income taxes payable4,000Notes receivable (trade)*6,000Merchandise inventory32,150Long-term note payable, secured by mortgage on plant assets63,400Prepaid expenses2,600Common stock89,000Plant assets, net154,300Retained earnings77,150Total assets$255,850Total liabilities and equity$255,850* These are short-term notes receivable arising from customer(trade) sales.Required:Compute the following: (1) current ratio, (2) acid-test ratio, (3)days' sales uncollected, (4) inventory turnover, (5) days' sales ininventory, (6) debt-to-equity ratio, (7) times interest earned, (8)profit margin ratio, (9) total asset turnover, (10) return on totalassets, and (11) return on common stockholders' equity.(Do not round intermediate calculations.)