Basic Financial Ratios The accounting staff of CCB Enterprises has completed the fi nancial statements for the 2010 calendar year. The statement of income for the current year and the comparative statements of fi nancial position for 2010 and 2009 follow.

CCB Enterprises Statement of Income For the Year Ended December 31, 2010

(thousands omitted)

Revenue:

Net sales $800,000 Other 60,000 Total revenue $860,000 Expenses:

Cost of goods sold $540,000 Research and development 25,000 Selling and administrative 155,000 Interest 20,000 Total expenses $740,000 Income before income taxes $120,000 Income taxes 48,000 Net income $ 72,000 CCB Enterprises Comparative Statements of Financial Position December 31, 2010 and 2009

(thousands omitted)

2010 2009 Assets Current assets:

Cash and short-term investments $ 26,000 $ 21,000 Receivables, less allowance for doubtful accounts

($1,100 in 2010 and $1,400 in 2009) 48,000 50,000 Inventories, at lower of FIFO cost or market 65,000 62,000 Prepaid items and other current assets 5,000 3,000 Total current assets $ 144,000 $136,000 Other assets:

Investments, at cost $ 106,000 $106,000 Deposits 10,000 8,000 Total other assets $ 116,000 $ 114,000 Property, plant, and equipment:

Land $ 12,000 $ 12,000 Buildings and equipment, less accumulated depreciation

($126,000 in 2010 and $122,000 in 2009) 268,000 248,000 Total property, plant, and equipment $280,000 $260,000 Total assets $540,000 $510,000.

2010 2009 Liabilities and Owners’ Equity Current liabilities:
Short-term loans $ 22,000 $ 24,000 Accounts payable 72,000 71,000 Salaries, wages, and other 26,000 27,000 Total current liabilities $ 120,000 $ 122,000 Long-term debt $ 160,000 $ 171,000 Total liabilities $ 280,000 $ 293,000 Owners’ equity:
Common stock, at par $ 44,000 $ 42,000 Paid-in capital in excess of par 64,000 61,000 Total paid-in capital $ 108,000 $ 103,000 Retained earnings 152,000 114,000 Total owners’ equity $ 260,000 $ 217,000 Total liabilities and owners’ equity $ 540,000 $ 510,000 Required 1. Calculate the following fi nancial ratios for 2010 for CCB Enterprises:

a. Times interest earned

b. Return on total assets

c. Return on common stockholders’ equity

d. Debt-to-equity ratio (at December 31, 2010)

e. Current ratio (at December 31, 2010)

f. Quick (acid-test) ratio (at December 31, 2010)
g. Accounts receivable turnover ratio (Assume that all sales are on credit.)
h. Number of days’ sales in receivables i. Inventory turnover ratio (Assume that all purchases are on credit.)
j. Number of days’ sales in inventory k. Number of days in cash operating cycle 2. Prepare a few brief comments on the overall fi nancial health of CCB Enterprises.
For each comment, indicate any information that is not provided in the problem that you would need to fully evaluate the company’s fi nancial health.
AppendixLO1