Here are simplified financial statements for Phone Corporation in 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 current assets $ 3,830 $ 3,973 Net property, plant, and equipment 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 current liabilities $ 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 Total liabilities and shareholders’ equity $ 28,119 $ 27,758 Calculate the following financial ratios for Phone Corporation: (Use 365 days in a year. Do not round intermediate calculations. Round your final answers to 2 decimal places.) d. days in inventory (use start-of-year balance sheet figures) e. inventory turnover(use start-of-year balance sheet figures) f. average collection period (use start-of-year balance sheet figures) g. operating profit margin h. long-term debt ration (use end-of-year balance sheet figures) i. total debt ratio (use end-of-year balance sheet figures) j. times interest earned k. cash coverage ratio l. current ratio (use end-of-year balance sheet figures) m. quick ratio (use end-of-year balance sheet figures)

Here are simplified financial statements for Phone Corporation in 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 current assets $ 3,830 $ 3,973 Net property, plant, and equipment 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 current liabilities $ 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 Total liabilities and shareholders’ equity $ 28,119 $ 27,758 Calculate the following financial ratios for Phone Corporation: (Use 365 days in a year. Do not round intermediate calculations. Round your final answers to 2 decimal places.) d. days in inventory (use start-of-year balance sheet figures) e. inventory turnover(use start-of-year balance sheet figures) f. average collection period (use start-of-year balance sheet figures) g. operating profit margin h. long-term debt ration (use end-of-year balance sheet figures) i. total debt ratio (use end-of-year balance sheet figures) j. times interest earned k. cash coverage ratio l. current ratio (use end-of-year balance sheet figures) m. quick ratio (use end-of-year balance sheet figures)

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter16: Financial Statement Analysis

Section: Chapter Questions

Problem 4PB

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Question

Here are simplified financial statements for Phone Corporation in 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 current assets	$	3,830		$	3,973
Net property, plant, and equipment		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 current liabilities	$	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
Total liabilities and shareholders’ equity	$	28,119		$	27,758

Calculate the following financial ratios for Phone Corporation: (Use 365 days in a year. Do not round intermediate calculations. Round your final answers to 2 decimal places.)

d. days in inventory (use start-of-year balance sheet figures)

e. inventory turnover(use start-of-year balance sheet figures)

f. average collection period (use start-of-year balance sheet figures)

g. operating profit margin

h. long-term debt ration (use end-of-year balance sheet figures)

i. total debt ratio (use end-of-year balance sheet figures)

j. times interest earned

k. cash coverage ratio

l. current ratio (use end-of-year balance sheet figures)

m. quick ratio (use end-of-year balance sheet figures)

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

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