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, $54,900; total assets, $239,400; common stock, $89,000; and retained earnings, $27,069.) Assets Cash Short-term investments Accounts receivable, net Merchandise inventory Prepaid expenses Plant assets, net CABOT CORPORATION Balance Sheet December 31 of current year Liabilities and Equity $ 14,000 Accounts payable 8,800 Accrued wages payable 28,800 Income taxes payable 32,150 Long-term note payable, secured by mortgage on plant assets 3,100 Common stock 149,300 Retained earnings $ 236,150 Total liabilities and equity $ 17,500 4,800 4,300 66,400 89,000 54,150 $ 236,150 Total assets CABOT CORPORATION Income Statement For Current Year Ended December 31 Sales $ 447,600 Cost of goods sold 298,550 Gross profit 149,050 Operating expenses 99,600 Interest expense 4,100 Income before taxes 45, 350 Income tax expense 18, 269 Net income $ 27,081 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 equity. (Do not round intermediate calculations.) Complete this question by entering your answers in the tabs below. Req 1 and 2 Req3 Req 4 Req 5 Reg 6 Req 7 Req 8 Reg 9 Req 10 Req 11 Compute the current ratio and acid-test ratio. (1) Current Ratio Numerator: 1 Denominator: II Current Ratio / = Current ratio 1 II to 1 (2) Acid-Test Ratio Numerator: 1 Denominator: II Acid-Test Ratio 1 = Acid-Test Ratio = to 1 Req 1 and 2 Req 3 Req 4 Reg 5 Reg 6 Req 7 Req 8 Req 9 Req 10 Req 11 Compute the days' sales uncollected. (3) Days' Sales Uncollected Numerator: Denominator: x Days II Days Sales Uncollected II Days sales uncollected / X II days 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 Numerator: / Denominator: II Inventory Turnover Inventory turnover II / = times Req 1 and 2 Req3 Req 4 Req 5 Req 6 Req 7 Reg 8 Req 9 Req 10 Req 11 Compute the days' sales in inventory. (5) Days' Sales in Inventory. Numerator: / Denominator: X Days II / x = Days' Sales in Inventory Days' sales in inventory days X = Req 1 and 2 Req3 Req 4 Req 5 Req 6 Req 7 Reg 8 Req 9 Req 10 Req 11 Compute the debt-to-equity ratio. (6) Debt-to-Equity Ratio Numerator: 1 Denominator: II 1 II Debt-to-Equity Ratio Debt-to-equity ratio to 1 / II Req 1 and 2 Req3 Req 4 Req 5 Reg 6 Req 7 Req 8 Req 9 Req 10 Req 11 Compute the times interest earned. (7) Times Interest Earned Numerator: / Denominator: = Times Interest Earned + 1 Times interest earned + 1 = times Req 1 and 2 Reg 3 Reg 4 Req 5 Req 6 Req 7 Req 8 Req 9 Req 10 Req 11 Compute the profit margin ratio. (8) Profit Margin Ratio Numerator: 1 Denominator: II II Profit margin ratio Profit margin ratio % II Req 1 and 2 Req 3 Reg 4 Reg 5 Req 6 Req 7 Req 8 Req 9 Req 10 Req 11 Compute the total asset turnover. (9) Total Asset Turnover Numerator: 1 Denominator: Il Total Asset Turnover 1 II Total asset turnover 1 = times
