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Selected year-end financial statements of Cabot Corporation follow. (All sales were on credit; selected balance sheet amounts at December 31, 2016, were inventory, $52.900; total assets, $229,400; common stock, $88,000; and retained earnings. $32,712.) CABOT CORPORATION Income Statement For Year Ended December 31, 2017 Sales $ 450, 600 Cost of goods sold 297,650 Gross profit 152,950 Operating expenses 99, 100 Interest expense 3,800 Income before taxes 50,050 Income taxes 20. 162 Net Income $ 29,888 $ 16,500 3,200 CABOT CORPORATION Balance Sheet December 31, 2015 Assets Liabilities and Equity Cash $ 8.000 Accounts payable Short-term 8.400 Accrued wages payable investments Accounts 31,400 Income taxes payable receivable, not Notes receivable (trade) 3.500 Merchandise 34,150 Long-term note payable, secured by inventory mortgage on plant assets Prepaid expenses 2.650 Common stock Plant assets, net 150,00 Retained earnings Total assets $ 238,400 Total liabilities and equity 3,700 64,400 88,000 62.600 $ 238, 400 * These are short-term notes receivable arising from customer (trade) sales. Required: Compute the following: (1) current ratio, (2) acid-test ratio, (3) days' sales uncollected, (4) inventory turnover. (5) days' sales in inventory. (6) debt-to-equity ratio. (7) times interest earned, (8) profit margin ratio, (9) total asset turnover (10) return on total assets, and (11) return on common stockholders' equity. (Do not round Intermediate calculations.) Compute the current ratio and acid-test ratio. Choose Numerator: Current assets 2017: $ 88,100 Current Ratio I Choose Denominator: 1 Current liabilities $ 23,400 - = Current Ratio Current ratio 3.8 to 1 (2) Choose Numerator: Current assets 2017: $ 23,400 Acid-Test Ratio Choose Denominator: Current liabilities $ 23,400 = = Acid-Test Ratio Acid-Test Ratio 1.0 to 1 Compute the days' sales uncollected. Days' Sales Uncollected 1 Choose Denominator: X Day Choose Numerator: Days Sales Uncollected Accounts Receivable, net (including current 11 Net sales notes receivable from customers) * 365 = Days sales uncollected 2017: $ 34,900 $ 450,600 x 365 = 28.3 days Compute the debt-to-equity ratio. = (6) Choose Numerator: Total liabilities 2017: $ 87,800 Debt-to-Equity Ratio Choose Denominator: Total equity $ 150,600 1 Debt-to-Equity Ratio Debt-to-equity ratio 0.58 to 1 Compute the times interest earned.. (7) Times Interest Earned Choose Numerator: 1 Choose Denominator: - Times Interest Earned Times interest earned 2017: 0 times Compute the profit margin ratio. I (8) Choose Numerator: Net sales 2017: $ 29,888 Profit Margin Ratio Choose Denominator: = = $ 450,600] = Profit margin ratio Profit margin ratio 6.6 / % I Compute the total asset turnover. (9) Total Asset Turnover Choose Numerator: 1 Choose Denominator: Net sales 1 ! Average total assets 2017: $ 450,600 / $ 233,900 - = Total Asset Turnover Total asset turnover 1.9 times Compute the return on total assets. (10) Choose Numerator: Net income 2017: $ 29,888 Return on Total Assets I Choose Denominator: = 1 Average total assets = / $ 283,900 = Return on Total Assets Return on total assets 10.5 % Compute the return on common stockholders' equity. (11) Choose Numerator: Net income 2017: Return on Common Stockholders' Equity Choose Denominator - Return On Common Stockholders' Equity Return on common stockholders' equity Rec10
