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	$801,320
Other	59,160
Total revenue	$860,480
Expenses:
Cost of goods sold	$548,020
Research and development	25,840
Selling and administrative	154,040
Interest	20,140
Total expenses	$748,040
Income before income taxes	$112,440
Income taxes	44,976
Net income	$67,464

CCB Enterprises
Comparative Statements of Financial Position
December 31, 2017 and 2016
(thousands omitted)
	2017	2016
Assets
Current assets:
Cash and short-term investments	$26,040	$20,880
Receivables, less allowance for doubtful accounts
($1,110 in 2017 and $1,370 in 2016)	47,960	49,700
Inventories, at lower of FIFO cost or market	65,150	61,820
Prepaid items and other current assets	5,010	2,900
Total current assets	$144,160	$135,300
Other assets:
Investments, at cost	$105,780	$105,780
Deposits	9,990	7,730
Total other assets	$115,770	$113,510
Property, plant, and equipment:
Land	$12,200	$12,200
Buildings and equipment, less accumulated depreciation
($125,220 in 2017 and $121,950 in 2016)	268,470	248,290
Total property, plant, and equipment	$280,670	$260,490
Total assets	$540,600	$509,300
Liabilities and Owners Equity
Current liabilities:
Short-term loans	$22,130	$24,080
Accounts payable	72,150	70,790
Salaries, wages, and other	26,240	27,230
Total current liabilities	$120,520	$122,100
Long-term debt	$159,520	$170,780
Total liabilities	$280,040	$292,880
Owners equity:
Common stock, at par	$43,770	$42,130
Paid-in capital in excess of par	63,770	61,020
Total paid-in capital	$107,540	$103,150
Retained earnings	153,020	113,270
Total owners equity	$260,560	$216,420
Total liabilities and owners equity	$540,600	$509,300

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.