157. The following information is from Omega Corporation’s balance sheets as of December 31, 2013 and 2014 and its income statement for 2014:
2014
2013
Assets:
Cash
$ 18,000
$ 22,000
Marketable securities
25,000
0
Accounts receivable
38,000
42,000
Inventory
61,000
52,000
Prepaid insurance
6,000
9,000
Long-term investments
49,000
20,000
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 sold
123,000
Interest expense
15,600
Income tax expense
27,000
From the above information, calculate the following ratios for 2014: (a) Inventory turnover.(b) Accounts receivable turnover.(c) Return on total assets.(d) Times interest earned.(e) Total asset turnover.
158. The following are summaries from the income statements and balance sheets of Red Shoe, Inc. and Blue Shoe, Inc.
RED SHOE, INC.
Consolidated Balance Sheets
(in millions)
May 31
2014
2013
Assets
Current assets:
Cash and cash equivalents
$634.0
$575.5
Accounts receivable, net of allowance
2,101.1
1,804.1
Inventories
1,514.9
1,373.8
Other current assets
429.9
401.3
Total current assets
4,679.9
4,154.7
Property, plant, and equipment, net
1,620.8
1614.5
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 payable
75.4
425.2
Accounts payable
572.7
504.4
Accrued liabilities
1,054.2
765.3
Income taxes payable
107.2
83.0
Total current liabilities
2,015.2
1,833.2
Long-term liabilities
708.0
767.8
Total liabilities
2,723.2
2,601.0
Stockholders’ equity:
Common stock
2.8
2.8
Contributed capital in excess of par value
589.0
538.7
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
RED SHOE, INC.
Consolidated Statement of Income
May 31, 2014
(in millions)
Revenues
$ 10,697.0
Cost of sales
6,313.6
Gross profit
4,383.4
Operating expenses
3,137.6
Operating income
1,245.8
Interest expense
42.9
Other revenues and expenses
79.9
Income before tax
1,123.0
Income taxes
382.9
Income before effect of accounting change
740.1
Cumulative effect of accounting change, net of tax
266.1
Net income
$ 474.0
BLUE SHOE, INC.
Consolidated Balance Sheets
(in millions)
Jan. 3,
2014
Jan. 4,
2013
Assets
Current assets:
Cash and cash equivalents
$34.5
$22.2
Accounts receivable, net of allowance
15.5
14.7
Inventories
27.2
28.4
Other current assets
3.5
4.2
Total current assets
80.7
69.5
Property, plant, and equipment, net
5.7
7.0
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 liabilities
16.3
12.2
Long-term liabilities
2.5
2.6
Total liabilities
18.8
14.8
Stockholders’ equity:
Common stock
2.3
2.3
Contributed capital in excess of par value
17.8
17.4
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
BLUE SHOE, INC.
Consolidated Statement of Income
January 3, 2014
(in millions)
Revenues
$ 133.5
Cost of sales
87.3
Gross profit
46.2
Operating expenses
37.3
Operating income
8.9
Interest expense
(0.1)
Other revenues and expenses
0.3
Income before tax
9.1
Income taxes
3.9
Net income
$5.2
(1) For both companies compute the following ratios for 2014:
(a) Current ratio(b) Acid-test ratio(c) Accounts receivable turnover(d) Inventory turnover(e) Days’ sales in inventory(f) Days’ sales uncollectedWhich company do you consider to be the better short-term credit risk? Explain.(2) For both companies compute the following ratios for 2014:(a) Profit margin ratio(b) Return on total assets(c) Return on common stockholders’ equityWhich company do you consider to have better profitability ratios?
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