Selected current year-end financial statements of Cabot Corporation follow. (All sales were on credit; selected balance sheet amounts at December 31 of the prior year were inventory, $48,900; total assets, $189,400; common stock, $85,000; and retained earnings, $35,703.) CABOT CORPORATION Income Statement For Current Year Ended December 31 $ 454,600 297,650 Sales Cost of goods sold Gross profit Operating expenses 156,950 99,400 3,800 Interest expense Income before taxes 53,750 21,653 Income tax expense $ 32,097 Net income CABOT CORPORATION Balance Sheet December 31 Liabilities and Equity Accounts payable Accrued wages payable Income taxes payable Long-term note payable, secured by mortgage on plant assets Assets $ 10,000 $ 15,500 Cash Short-term investments 9,400 30,400 38,150 3,800 3,200 67,400 Accounts receivable, net Merchandise inventory Prepaid expenses 2,450 152,300 Retained earnings Common stock 85,000 67,800 Plant assets, net $ 242,700 $ 242,700 Total liabilities and equity Total assets 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.) Req 10 Req 1 and 2 Req 5 Req 7 Req 9 Req 3 Req 4 Req 6 Req 8 Req 11 Compute the current ratio and acid-test ratio. (1) Current Ratio Choose Numerator: Choose Denominator: Current Ratio %3D Current ratio %3D to 1 (2) Acid-Test Ratio Acid-Test Ratio Choose Numerator: Choose Denominator: Acid-Test Ratio to 1 Req 3 > Reg 1 and 2 Req 5 Req 6 Req 1 and 2 Req 4 Req 3 Req 7 Req 8 Req 9 Req 10 Req 11 Compute the days' sales uncollected. Days' Sales Uncollected (3) Days Sales Uncollected Choose Numerator: Choose Denominator: Days Days sales uncollected %3D days %3D Req 1 and 2 Req 4 Req 9 Req 1 and 2 Req 4 Req 6 Req 7 Req 5 Req 10 Req 11 Req 3 Req 8 Compute the inventory turnover. Inventory Turnover (4) Inventory Turnover Choose Numerator: Choose Denominator: %3D Inventory turnover times %3D Req 3 Req 5 Req 1 and 2 Req 5 Req 3 Req 6 Req 7 Req 9 Req 11 Req 4 Req 8 Req 10 Compute the days' sales in inventory. Days' Sales in Inventory (5) Days' Sales in Inventory Choose Denominator: Choose Numerator: Days %3D Days' sales in inventory days Req 6 > Req 4 Req 6 Req 1 and 2 Req 11 Req 5 Req 7 Reg 3 Req 4 Req 8 Req 9 Req 10 Compute the debt-to-equity ratio. Debt-to-Equity Ratio (6) Debt-to-Equity Ratio Choose Numerator: Choose Denominator: %3D Debt-to-equity ratio to 1 Req 7 Req 5 Reg 5 Req 1 and 2 Req 11 Req 3 Req 4 Req 6 Req 7 Req 8 Req 9 Req 10 Compute the times interest earned. (7) Times Interest Earned Choose Numerator: Times Interest Earned Choose Denominator: Times interest earned times Req 11
