Problem 4-7 Financial Ratios (LO3)

Here are simplified financial statements for Phone Corporation in a recent year:

INCOME STATEMENT
(Figures in $ millions)
Net sales	$	14,100
Cost of goods sold		4,560
Other expenses		4,217
Depreciation		2,818
Earnings before interest and taxes (EBIT)	$	2,505
Interest expense		735
Income before tax	$	1,770
Taxes (at 30%)		531
Net income	$	1,239
Dividends	$	976

BALANCE SHEET
(Figures in $ millions)
	End of Year				Start of Year
Assets
Cash and marketable securities	$	99			$	168
Receivables		2,882				2,690
Inventories		237				288
Other current assets		917				982
Total current assets	$	4,135			$	4,128
Net property, plant, and equipment		20,073				20,015
Other long-term assets		4,316				3,870
Total assets	$	28,524			$	28,013
Liabilities and shareholders equity
Payables	$	2,664			$	3,140
Short-term debt		1,469				1,623
Other current liabilities		861				837
Total current liabilities	$	4,994			$	5,600
Long-term debt and leases		4,528				5,043
Other long-term liabilities		6,278				6,249
Shareholders equity		12,724				11,121
Total liabilities and shareholders equity	$	28,524			$	28,013

Calculate the following financial ratios for Phone Corporation: (Use 365 days in a year. Do not round intermediate calculations. Round your final answers to 2 decimal places.)

a.	Return on equity (use average balance sheet figures)		%
b.	Return on assets (use average balance sheet figures)		%
c.	Return on capital (use average balance sheet figures)		%
d.	Days in inventory (use start-of-year balance sheet figures)		days
e.	Inventory turnover (use start-of-year balance sheet figures)
f.	Average collection period (use start-of-year balance sheet figures)		days
g.	Operating profit margin		%
h.	Long-term debt ratio (use end-of-year balance sheet figures)
i.	Total debt ratio (use end-of-year balance sheet figures)
j.	Times interest earned
k.	Cash coverage ratio
l.	Current ratio (use end-of-year balance sheet figures)
m.	Quick ratio (use end-of-year balance sheet figures)