Consider the following financial statement data:
Balance Sheet

Income Statement
Sales $100
Cost of goods sold 50
Gross profit 50
Operating expenses 14
Income from operations 36
Less: Interest 6
Income before income taxes 30
Less: Income taxes 10
Net income $20
Assume that the average of all balance sheet items is equal to the yearend figure and that all sales are on credit.
Required:
1. Calculate the following ratios:
a. Return on total assets (assume interest has been paid)
b. Return on shareholders' equity
c. Times interest earned ratio
d. Earnings per share
e. Number of days of sales in inventory
f. Accounts receivable collection period
g. Sales to total assets ratio
h. Current ratio
i. Acid-test ratio
j. Debt to shareholders' equity ratio.
2. Which of these ratios are measures of liquidity?
3. (Appendix) Restate the financial statements to facilitate Scott formula analysis.
4. (Appendix) Calculate the Scott formula.

Transcribed Image Text:

$20 Accounts payable Cash Accounts receivable Merchandize inventory Plant, at carrying amount $20 60 40 Common shares (8 shares issued 80 60 $220 20 Non-current borrowings Retained earnings 140 $220