Problem 17-4A Calculation of financial statement ratios LO P3 Selected year-end financial statements of Cabot Corporation follow. (All sales were on credit; selected balance sheet amounts at December 31, 2016, were inventory, $55,900; total assets, $229,400; common stock, $81,000; and retained earnings, $54,024.) CABOT CORPORATION Income Statement For Year Ended December 31, 2017 Sales $ 449,600 Cost of goods sold 298,450 Gross profit 151,150 Operating expenses 99,600 Interest expense 4,200 Income before taxes 47,350 Income taxes 19,074 Net income $ 28,276 CABOT CORPORATION Balance Sheet December 31, 2017 Liabilities and Equity Accounts payable $ 16,000 $ 17,500 4,800 8,400 Accrued wages payable 31,000 Income taxes payable 3,900 Assets Cash Short-term investments Accounts receivable, net Notes receivable (trade) * Merchandise inventory Prepaid expenses Plant assets, net Total assets 6,000 34,150 62,400 3,050 153,300 $ 251,900 Long-term note payable, secured by mortgage on plant assets Common stock Retained earnings Total liabilities and equity 81,000 82,300 $ 251,900 * 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.) Complete this question by entering your answers in the tabs below. Req 1 and 2 Req3 Req 4 Reg 5 Reg 6 Req 7 Req 8 Req 9 Req 10 Req 11 Compute the current ratio and acid-test ratio. (1) Current Ratio Choose Numerator: Choose Denominator: = Current Ratio Current assets Current liabilities = Current ratio 2017: = 0 to 1 (2) Acid-Test Ratio Choose Numerator: | Choose Denominator: = Acid-Test Ratio Quick assets /Current liabilities = Acid-Test Ratio 2017: 0 to 1 Complete this question by entering your answers in the tabs below. Req 1 and 2 Req3 Req 4 Req 5 Req 6 Req 7 Req 8 Req 9 Req 10 Req 11 Compute the days' sales uncollected. (3) Days' Sales Uncollected Choose Numerator: 1 Choose Denominator: Days Il Days Sales Uncollected Accounts Receivable, net (including current notes receivable from customers) 1 Net sales = Days sales uncollected 2017: / = 0 days Complete this question by entering your answers in the tabs below. Req 1 and 2 Req 3 Req 4 Req 5 Req 6 Req 7 Req 8 Req 9 Req 10 Req 11 Compute the inventory turnover. (4) Inventory Turnover Choose Numerator: / Choose Denominator: Inventory Turnover Inventory turnover Cost of goods sold | Average inventory = 2017: / = O times Complete this question by entering your answers in the tabs below. Req 1 and 2 Req3 Req 4 Req 5 Req 6 Req 7 Req 8 Req 9 Req 10 Req 11 Compute the days' sales in inventory. (5) Choose Numerator: Days' Sales in Inventory. Choose Denominator: Days Cost of goods sold = Merchandise inventory = Days' Sales in Inventory Days' sales in inventory 0 days 2017: 1 = Complete this question by entering your answers in the tabs below. Req 1 and 2 Req 3 Reg 4 Req 5 Req 6 Req 7 Req 8 Req 9 Req 10 Reg 11 Compute the debt-to-equity ratio. (6) Debt-to-Equity Ratio Choose Numerator: 1 Choose Denominator: = Debt-to-Equity Ratio Debt-to-equity ratio Total liabilities / Total equity = 2017: 1 = O to 1 Complete this question by entering your answers in the tabs below. Req 1 and 2 Req 3 Reg 4 Req 5 Req 6 Req 7 Req 8 Req 9 Req 10 Req 11 Compute the times interest earned. (7) Times Interest Earned Choose Numerator: 1 Choose Denominator: = Times Interest Earned Income before tax + Interest expense / Interest expense = Times interest earned 2017: + / = O times Complete this question by entering your answers in the tabs below. Req 1 and 2 Reg 3 Req 4 Req 5 Req 6 Req 7 Req 8 Req 9 Req 10 Req 11 Compute the profit margin ratio. (8) Profit Margin Ratio Choose Numerator: Choose Denominator: = Net income / Net sales = Profit margin ratio Profit margin ratio 0 % 2017: / = Req 7 Req 9 Complete this question by entering your answers in the tabs below. Req 1 and 2 Req 3 Req 4 Req 5 Req 6 Req 7 Req 8 Req 9 Req 10 Req 11 Compute the total asset turnover. (9) Total Asset Turnover Choose Numerator: Choose Denominator: = Total Asset Turnover Net sales 1 II Average total assets Total asset turnover 2017: = 0 times Complete this question by entering your answers in the tabs below. Req 1 and 2 Req 3 Req 4 Req 5 Req 6 Req 7 Req 8 Req 9 Req 10 Req 11 Compute the return on total assets. (10) Return on Total Assets Choose Numerator: Return on Total Assets 1 Choose Denominator: | Average total assets Net income = Return on total assets 2017: / = 0 %