Question
The financial statements of Sol Company appear below: Sol COMPANY Comparative Statements of Financial Position December 31 Assets 2020 2019 Property, plant and equipment (net)..................................................
The financial statements of Sol Company appear below:
Sol COMPANY
Comparative Statements of Financial Position
December 31
Assets 2020 2019
Property, plant and equipment (net).................................................. $330,000 $300,000
Inventory............................................................................................ 80,000 70,000
Accounts receivable (net).................................................................. 50,000 40,000
Short-term investments..................................................................... 45,000 60,000
Cash................................................................................................... 25,000 40,000
Total assets ................................................................................ $530,000 $510,000
Equity and liabilities
Share capital ordinary.................................................................... $180,000 $150,000
Retained earnings.............................................................................. 140,000 70,000
Bonds payable................................................................................... 120,000 160,000
Accounts payable.............................................................................. 20,000 40,000
Short-term notes payable.................................................................. 70,000 90,000
Total equity and liabilities ........................................................... $530,000 $510,000
Sol COMPANY
Income Statement
For the Year Ended December 31, 2020
Net sales............................................................................................ $420,000
Cost of goods sold............................................................................. 240,000
Gross profit........................................................................................ 180,000
Operating expenses........................................................................... 42,000
Income from operations..................................................................... 138,000
Interest expense................................................................................ 18,000
Income before income taxes............................................................. 120,000
Income tax expense.......................................................................... 30,000
Net income........................................................................................ $ 90,000
Additional information:
a. Cash dividends of $20,000 were declared and paid in 2020.
b. Weighted-average number of ordinary shares outstanding during 2020 was 55,000 shares.
c. Market value of ordinary shares on December 31, 2020, was $24 per share.
Instructions
Using the financial statements and additional information, compute the following ratios for Sol Company for 2020. Show all computations.
| Liquidity | Computation | 2020 Ratio |
| Current ratio |
|
|
| Acid -test ratio |
|
|
| Accounts receivables turnover |
|
|
| Average collection period in days |
|
|
| Inventory turnover |
|
|
| Days in inventory |
|
|
| Operating Cycle |
|
|
| Profitability |
|
|
| Profit margin |
|
|
| Asset turnover |
|
|
| Return on assets |
|
|
| Return on ordinary shareholders' equity |
|
|
| Earning per share (EPS) |
|
|
| Price earning (PE) ratio |
|
|
| Payout ratio |
|
|
| Solvency |
|
|
| Debt to asset ratio |
|
|
| Times interest earned |
|
|
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
Statistics Informed Decisions Using Data
Authors: Michael Sullivan III
5th Edition
9780134133539
