1. Compute and Interpret financial ratios that managers use to assess liquidity 2. Compute and Interpret financlal ratios that managers use for asset management purposes 3. Compute and Interpret financial ratios that managers use for debt management purposes 1 Recent financial statements for Zimmer, Inc. are as follows: 2 Zimmer Company Zimmer Company Comparative Balance Sheet Income Statement 4 This Year Last Year This Year 5 Assets 6 Current assets: 7 Cash 360,000 $ 310,000 Sales (all on account) $4,980,000 8 Marketable securities 220,000 80,000 Cost of goods sold 2,988,000 9 Accounts receivable, net 775,000 700,000 Gross margin 1,992,000 10 Inventory 925,000 750,000 Selling and administrative expenses 11 Other current assets 355,000 195,000 Operating expenses 985,500 12 Total current assets 13 Plant and equipment, net 14 Other assets 2,635,000 2,035,000 Depreciation and amortization 410,500 1,975,000 General and administrative expenses 1,800,000 150,000 Total selling and administrative expenses 75,000 100,000 1,546,000 15 Total assets 4,685,000 3.935,000 Net operating income 446,000 16 Liabilities and Stockholders' Equity 17 Current Liabilities Interest expense 60,000 Net income before taxes 386,000 18 Accounts payable 250,000 S 225,000 Income taxes 135,100 19 Short-term bank losns Accrued payables 600,000 Net income S 250 900 750,000 20 395,000 550,000 21 223,400 Additional information: 275,000 Other current liabilities 22 Total current liabilities 1,825,000 1,443,400 Dividend per share paid in current year 1.00 23 Bonds payable, 10 % 400,000 Market price of shares at year end 42.00 575,000 42.00 Market price of shares at year end 575,000 400,000 23 Bonds payable, 10 % 24 Total liabilities 20.00 Par value of common stock per share 1,843,400 2,400,000 25 Stockholders' equity: Number of shares outstanding 1,150,000 1,150,000 26 Common stock 941,600 1,135,000 27 Retained earnings 2,091,600 28 Total stockholders' equity 2,285,000 29 Total liabilities and stockholders' equity 4,685,000 S3,935,000 30 31 Required: 32 Compute the following ratios for the current year only 33 Gross margin percentage 34 Current ratio (rounded to two decimal places) 35 Acid-test ratio (rounded to two decimal places) 36 Accounts receivable turnover (rounded to two decimal places) 37 Average collection period (rounded to the nearest whole day) 38 Inventory turnover ratio (rounded to two decimal places) 39 Average sales period (rounded to the nearest whole day) 40 Debt-to-equity ratio (rounded to two decimal places) 41 Times interest earned (rounded to two decimal places) 42 Book value per share (rounded to two decimal places) 43 Earnings per share (rounded to two decimal places) Required: Compute the following ratios for the current year only: Gross margin percentage Current ratio (rounded to two decimal places) Acid-test ratio (rounded to two decimal places) Accounts receivable turnover (rounded to two decimal places) Average collection period (rounded to the nearest whole day) Inventory turnover ratio (rounded to two decimal places) Average sales period (rounded to the nearest whole day) Debt-to-equity ratio (rounded to two decimal places) Times interest earned (rounded to two decimal places) Book value per share (rounded to two decimal places) Earnings per share (rounded to two decimal places) Dividend payout ratio (rounded to three decimal places) Dividend yield ratio (rounded to three decimal places) Price-earnings ratio (rounded to two decimal places)
