Basic Financial Ratios

The accounting staff of CCB Enterprises has completed the financial statements for the 2017 calendar year. The statement of income for the current year and the comparative statements of financial position for 2017 and 2016 follow.

CCB Enterprises
Statement of Income
For the Year Ended December 31, 2017
(thousands omitted)
Revenue:
Net sales	$802,980
Other	61,500
Total revenue	$864,480
Expenses:
Cost of goods sold	$543,260
Research and development	25,780
Selling and administrative	153,500
Interest	20,240
Total expenses	$742,780
Income before income taxes	$121,700
Income taxes	48,680
Net income	$73,020

CCB Enterprises
Comparative Statements of Financial Position
December 31, 2017 and 2016
(thousands omitted)
	2017	2016
Assets
Current assets:
Cash and short-term investments	$26,170	$21,200
Receivables, less allowance for doubtful accounts
($1,070 in 2017 and $1,370 in 2016)	48,050	50,100
Inventories, at lower of FIFO cost or market	64,760	61,980
Prepaid items and other current assets	5,240	3,080
Total current assets	$144,220	$136,360
Other assets:
Investments, at cost	$105,760	$105,760
Deposits	10,220	7,850
Total other assets	$115,980	$113,610
Property, plant, and equipment:
Land	$12,210	$12,210
Buildings and equipment, less accumulated depreciation
($126,620 in 2017 and $122,890 in 2016)	268,740	248,250
Total property, plant, and equipment	$280,950	$260,460
Total assets	$541,150	$510,430
Liabilities and Owners Equity
Current liabilities:
Short-term loans	$21,750	$23,890
Accounts payable	71,790	71,110
Salaries, wages, and other	26,030	26,960
Total current liabilities	$119,570	$121,960
Long-term debt	$159,130	$170,410
Total liabilities	$278,700	$292,370
Owners equity:
Common stock, at par	$44,180	$42,090
Paid-in capital in excess of par	64,010	61,200
Total paid-in capital	$108,190	$103,290
Retained earnings	154,260	114,770
Total owners equity	$262,450	$218,060
Total liabilities and owners equity	$541,150	$510,430

Required:

1. Calculate the following financial ratios for 2017 for CCB Enterprises:

Round items h, j, and k to the nearest whole number. Round all other answers to two decimal places. Assume a 360-day year.

a. Times interest earned	fill in the blank 1 to 1
b. Return on total assets	fill in the blank 2 %
c. Return on common stockholders' equity	fill in the blank 3 %
d. Debt-to-equity ratio (at December 31, 2017)	fill in the blank 4 to 1
e. Current ratio (at December 31, 2017)	fill in the blank 5 to 1
f. Quick (acid-test) ratio (at December 31, 2017)	fill in the blank 6 to 1
g. Accounts receivable turnover ratio (Assume that all sales are on credit.)	fill in the blank 7 times
h. Number of days' sales in receivables	fill in the blank 8 days
i. Inventory turnover ratio (Assume that all purchases are on credit.)	fill in the blank 9 times
j. Number of days' sales in inventory	fill in the blank 10 days
k. Number of days in cash operating cycle	fill in the blank 11 days

2. Which of the following statements pertaining to ratio analysis of CCB Enterprises is true?

The company has low number of days' receivables outstanding indicating strong collection efforts.While the company has a strong interest coverage ratio, there is no guarantee that its debt service coverage will also be high.While the company has strong liquidity, its inventory has crept up in 2017 which could signal a problem.All of these are true.