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Selected current year-end financial statements of Cabot Corporation follow. (All sales were on credit; selected balance sheet amounts at December 31 of the prior year were inventory, $51,900; total assets, $219,400; common stock, $81,000; and retained earnings, $34,953.)   CABOT CORPORATION Balance Sheet December 31 of current year Assets   Liabilities and Equity   Cash $ 12,000 Accounts payable $ 16,500 Short-term investments 9,000 Accrued wages payable 3,800 Accounts receivable, net 33,200 Income taxes payable 4,700 Merchandise inventory 36,150 Long-term note payable, secured by mortgage on plant assets 71,400 Prepaid expenses 2,800 Common stock 81,000 Plant assets, net 151,300 Retained earnings 67,050 Total assets $ 244,450 Total liabilities and equity $ 244,450   CABOT CORPORATION Income Statement For Current Year Ended December 31 Sales $ 455,600 Cost of goods sold 298,050 Gross profit 157,550 Operating expenses 99,500 Interest expense 4,300 Income before taxes 53,750 Income tax expense 21,653 Net income $ 32,097   Required: Compute the following: (1) current ratio, (2) acid-test ratio, (3) days' sales uncollected,

Selected current year-end financial statements of Cabot Corporation follow. (All sales were on credit; selected balance sheet amounts at December 31 of the prior year were inventory, $51,900; total assets, $219,400; common stock, $81,000; and retained earnings, $34,953.)   CABOT CORPORATION Balance Sheet December 31 of current year Assets   Liabilities and Equity   Cash $ 12,000 Accounts payable $ 16,500 Short-term investments 9,000 Accrued wages payable 3,800 Accounts receivable, net 33,200 Income taxes payable 4,700 Merchandise inventory 36,150 Long-term note payable, secured by mortgage on plant assets 71,400 Prepaid expenses 2,800 Common stock 81,000 Plant assets, net 151,300 Retained earnings 67,050 Total assets $ 244,450 Total liabilities and equity $ 244,450   CABOT CORPORATION Income Statement For Current Year Ended December 31 Sales $ 455,600 Cost of goods sold 298,050 Gross profit 157,550 Operating expenses 99,500 Interest expense 4,300 Income before taxes 53,750 Income tax expense 21,653 Net income $ 32,097   Required: Compute the following: (1) current ratio, (2) acid-test ratio, (3) days' sales uncollected,

Managerial Accounting
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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Selected current year-end financial statements of Cabot Corporation follow. (All sales were on credit; selected balance sheet amounts at December 31 of the prior year were inventory, $51,900; total assets, $219,400; common stock, $81,000; and retained earnings, $34,953.)
 

CABOT CORPORATION
Balance Sheet
December 31 of current year
Assets   Liabilities and Equity  
Cash $ 12,000 Accounts payable $ 16,500
Short-term investments 9,000 Accrued wages payable 3,800
Accounts receivable, net 33,200 Income taxes payable 4,700
Merchandise inventory 36,150 Long-term note payable, secured by mortgage on plant assets 71,400
Prepaid expenses 2,800 Common stock 81,000
Plant assets, net 151,300 Retained earnings 67,050
Total assets $ 244,450 Total liabilities and equity $ 244,450

 

CABOT CORPORATION
Income Statement
For Current Year Ended December 31
Sales $ 455,600
Cost of goods sold 298,050
Gross profit 157,550
Operating expenses 99,500
Interest expense 4,300
Income before taxes 53,750
Income tax expense 21,653
Net income $ 32,097

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

Complete this question by entering your answers in the tabs below.

 
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  • Req 11

Compute the current ratio and acid-test ratio.

 
 
 
 
(1) Current Ratio
  Numerator: / Denominator: = Current Ratio
    /   = Current ratio
    /   =   to 1
 
(2) Acid-Test Ratio
  Numerator: / Denominator: = Acid-Test Ratio
    /   = Acid-Test Ratio
    /   =   to 1

Compute the days' sales uncollected.

3.

 
 
 
 
(3) Days' Sales Uncollected
  Numerator: / Denominator: × Days = Days Sales Uncollected
    /   ×   = Days sales uncollected
    /   ×   =   days
4. 

Compute the inventory turnover.

 
 
 
 
(4) Inventory Turnover
  Numerator: / Denominator: = Inventory Turnover
    /   = Inventory turnover
    /   =   times
5. 

Compute the days' sales in inventory.

 
 
 
 
(5) Days’ Sales in Inventory
  Numerator: / Denominator: × Days = Days’ Sales in Inventory
    /   ×   = Days’ sales in inventory
    /   ×   =   days
6. 

Compute the debt-to-equity ratio.

 
 
 
 
(6) Debt-to-Equity Ratio
  Numerator: / Denominator: = Debt-to-Equity Ratio
    /   = Debt-to-equity ratio
    /   =   to 1
7. 

Compute the times interest earned.

 
 
 
 
(7) Times Interest Earned
  Numerator: / Denominator: = Times Interest Earned
    +   /   = Times interest earned
    +   /   =   times
 

8. 

Compute the profit margin ratio.

 
 
 
 
(8) Profit Margin Ratio
  Numerator: / Denominator: = Profit margin ratio
    /   = Profit margin ratio
    /   =   %
 

9. 

Compute the total asset turnover.

 
 
 
 
(9) Total Asset Turnover
  Numerator: / Denominator: = Total Asset Turnover
    /   = Total asset turnover
    /   =   times
10. 

Compute the return on total assets.

 
 
 
 
(10) Return on Total Assets
  Numerator: / Denominator: = Return on Total Assets
    /   = Return on total assets
    /   =   %
 

11. 

Compute the return on equity.

 
 
 
 
(11) Return on Equity
  Numerator: / Denominator = Return On Equity
    /   = Return on equity
    /   =   %
 
 
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