195.Financial information for Sigma Company is presented below. Calculate the following ratios for 2016: (a) Inventory turnover. (b) Accounts receivable turnover. (c) Return on total assets. (d) Times interest earned. (e) Total asset turnover.
20162015
Assets:
Cash$18,000$22,000
Marketable securities25,0000
Accounts receivable38,00042,000
Inventory61,00052,000
Prepaid insurance6,0009,000
Long-term investments49,00020,000
Plant assets, net 218,000 225,000
Total assets $415,000 $370,000
Net income$62,250
Sales (all on credit)305,000
Cost of goods sold123,000
Interest expense15,600
Income tax expense27,000
196.The following summaries from the income statements and balance sheets of Kouris Company and Brittania, Inc. are presented below. (1) For both companies for 2016, compute the: (a) Current ratio (b) Acid-test ratio (c) Accounts receivable turnover (d) Inventory turnover (e) Days’ sales in inventory (f) Days’ sales uncollected Which company do you consider to be the better short-term credit risk? Explain. (2) For both companies for 2016, compute the: (a) Profit margin ratio (b) Return on total assets (c) Return on common stockholders’ equity Which company do you consider to have better profitability ratios?
Kouris Company Consolidated Balance Sheets(in millions)
May 31
20162015
Assets
Current assets:
Cash and cash equivalents$634.0$575.5
Accounts receivable, net of allowance2,101.11,804.1
Inventories1,514.91,373.8
Other current assets 429.9 401.3
Total current assets 4,679.9 4,154.7
Property, plant, and equipment, net1,620.81,614.5
Other long term assets 413.2 670.8
Total assets $6,713.9 $6,440.0
Liabilities and Stockholders’ Equity
Current liabilities:
Current portion of long-term debt$205.7$55.3
Notes payable75.4425.2
Accounts payable572.7504.4
Accrued liabilities1,054.2765.3
Income taxes payable 107.2 83.0
Total current liabilities2,015.21,833.2
Long term liabilities 708.0 767.8
Total liabilities 2,723.2 2,601.0
Stockholders’ equity:
Common stock2.82.8
Contributed capital in excess of par value589.0538.7
Unearned stock compensation(0.6)(5.1)
Accumulated other comprehensive loss(239.7)(192.4)
Retained earnings 3,639.2 3,495.0
Total stockholders’ equity 3,990.7 3,839.0
Total liabilities and stockholders’ equity $6,713.9 $6,440.0
Brittania, Inc.Consolidated Balance Sheets
Jan. 3,2016Jan. 4,2015
Assets
Current assets:
Cash and cash equivalents$34.5$22.2
Accounts receivable, net of allowance15.514.7
Inventories27.228.4
Other current assets 3.5 4.2
Total current assets80.769.5
Property, plant, and equipment, net5.77.0
Other long term assets 1.1 1.5
Total assets $87.5 $78.0
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable$8.5$6.6
Accrued liabilities 7.8 5.6
Total current liabilities16.312.2
Long term liabilities 2.5 2.6
Total liabilities 18.8 14.8
Stockholders’ equity:
Common stock2.32.3
Contributed capital in excess of par value17.817.4
Unearned stock compensation(0.1)(0.5)
Accumulated other comprehensive loss(0.9)(1.3)
Treasury stock(6.3)(5.4)
Retained earnings 55.9 50.7
Total stockholders’ equity 68.7 63.2
Total liabilities and stockholders’ equity $87.5 $78.0
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