Question
Changes in Various Ratios Presented below is selected information for Brimmer Company: 2016 2015 Sales Revenue $920,000 $840,000 Cost of goods sold $575,000 $545,000 Interest
Changes in Various Ratios
Presented below is selected information for Brimmer Company:
| 2016 | 2015 | |
| Sales Revenue | $920,000 | $840,000 |
| Cost of goods sold | $575,000 | $545,000 |
| Interest Expense | $20,000 | $20,000 |
| Net Income | $61,000 | $52,000 |
| Cash flow from operating activities | $65,000 | $55,000 |
| Capital Expenditures | $45,000 | $45,000 |
| Accounts receivable(net) December 31 | $126,000 | $120,000 |
| Inventory, December 31 | $196,000 | $160,000 |
| Stockholders' equity, December 31 | $450,000 | $400,000 |
| Total assets, December 31 | $750,000 | $675,000 |
Required:
A. Calculate the following ratios for 2016. The 2015 results are given for comparative purposes.
| 2015 | |
| 1. Gross profit percentage | 33.5 percent |
| 2. Return on assets | 8.3 percent |
| 3. Return sales | 6.2 percent |
| 4. Return in common stockholders' equity (no preferred stock was outstanding) | 13.9 percent |
| 5. Accounts receivable turnover | 7.50 |
| 6. Average collection period | 48.7 days |
| 7. Inventory turnover | 3.61 |
| 8. Times-interest-earned ratio | 4.80 |
| 9. Operating-cash-flow-to-capital-expenditures ratio | 1.22 |
B. Comment on the charges between the two years.
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Advanced Accounting
Authors: Joe Hoyle, Thomas Schaefer, Timothy Doupnik
10th edition
0-07-794127-6, 978-0-07-79412, 978-0077431808
