Homework for Accounting and Financial Reporting

Homework 4

Problem 7-25

a. Compute the amounts of the ratios listed in Exhibit 7.19 for the fiscal year ended December 31, 2013.

1. Return on Assets = Net Income / Average Total Assets = $2,849 / [0.5×($38,599 + $46,373)] = 6.7%

2. Profit Margin = Net Income / Sales = $2,849 / $61,471 = 4.6%

3. Total Assets Turnover = Sales / Average Total Assets = $61,471 / [0.5×($38,599 + $46,373)] = 1.46 times

4. Other Revenues/Sales = $1,918 / $61,471 = 3.1%

5. Cost of Goods Sold/Sales = $41,895/ $61,471 = 68.2%

6. Selling and Administrative
 Expenses/Sales = $16,200 / $61,471 = 26.4%

7. Interest Expense/Sales = $669 / $61,471 = 1.1%

8. Income Tax Expense/Sales = $1,776 / $61,471 = 2.9%

9. 
Accounts Receivable Turnover Ratio = Sales / Average Accounts Receivable = $61,471 / [0.5×($6,194+ $8,054)] = 8.6 times

10. Inventory Turnover Ratio = Cost of Goods Sold/ Average Inventories = $41,895 / [0.5×($6,780+ $6,254)] = 9.4 times

11. Fixed-Assets Turnover Ratio
 = $61,471 / [0.5×($25,908 +$22,681)] = 2.5 times

12. Return on Equity = Net income/ Shareholders’ Equity Average = $2,849 / [0.5×($15,307 + $15,633)] = 18.4%

13. Financial Leverage Ratio = ROE/ROA =18.4%/6.7%= 2.7

14. Current Ratio =Current Assets/ Current Liabilities= $18,906/ $11,782 = 6.4 times

15. Quick Ratio = ($2,450+$8,054)/ $11,782= 0.9

16. 
Accounts Payable Turnover Ratio= （cost of goods sold +beg inventory-end inventory） ($41,895+$6,780-$6,254)*2/($6575+$6,721) = 6.4times

17. Cash Flow from Operations to Current Liabilities Ratio =$4,125*2/($11,117 + $11, 782) = 36.0%.

18. Liabilities to Assets Ratio = $31,066/. $46,373 = 67.0%

19. Long-Term Debt Ratio = $16,939 / $46,373= 36.5%.

20. Debt-Equity Ratio =$16,939 / $15,307 = 110.7%

21. Cash Flow from Operations to Total Liabilities Ratio = $4,125 0.5/($22,966 + $31,066)

= 15.3%.

22. Interest Coverage Ratio = ($2,849 + $1,776 + $669)/ $669 = 7.9 times.

b....