Question
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
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 | $ | 13,700 |
Cost of goods sold | 4,360 | |
Other expenses | 4,047 | |
Depreciation | 2,698 | |
Earnings before interest and taxes (EBIT) | $ | 2,595 |
Interest expense | 715 | |
Income before tax | $ | 1,880 |
Taxes (at 35%) | 658 | |
Net income | $ | 1,222 |
Dividends | $ | 916 |
BALANCE SHEET | |||||||
(Figures in $ millions) | |||||||
End of Year | Start of Year | ||||||
Assets | |||||||
Cash and marketable securities | $ | 95 | $ | 164 | |||
Receivables | 2,682 | 2,610 | |||||
Inventories | 217 | 268 | |||||
Other current assets | 897 | 962 | |||||
Total current assets | $ | 3,891 | $ | 4,004 | |||
Net property, plant, and equipment | 20,033 | 19,975 | |||||
Other long-term assets | 4,276 | 3,830 | |||||
Total assets | $ | 28,200 | $ | 27,809 | |||
Liabilities and shareholders equity | |||||||
Payables | $ | 2,624 | $ | 3,100 | |||
Short-term debt | 1,449 | 1,603 | |||||
Other current liabilities | 841 | 817 | |||||
Total current liabilities | $ | 4,914 | $ | 5,520 | |||
Long-term debt and leases | 5,524 | 5,759 | |||||
Other long-term liabilities | 6,238 | 6,209 | |||||
Shareholders equity | 11,524 | 10,321 | |||||
Total liabilities and shareholders equity | $ | 28,200 | $ | 27,809 | |||
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)
.Inventory turnover (use start-of-year balance sheet figures)
f.Average collection period (use start-of-year balance sheet figures)
Operating profit margin
h.Long-term debt ratio (use end-of-year balance sheet figures)0.32i
.Total debt ratio (use end-of-year balance sheet figures)
.Times interest earned
.Cash coverage ratiol.Current ratio (use end-of-year balance sheet figures)
Quick ratio (use end-of-year balance sheet figures)
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