Question :
195. Financial information for Sigma Company presented below.Calculate the following ratios : 1257769
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.
2016
2015
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
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 uncollectedWhich 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’ equityWhich company do you consider to have better profitability ratios?
Kouris CompanyConsolidated Balance Sheets
(in millions)
May 31
2016
2015
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
1,614.5
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 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
Kouris Company
Consolidated Statement of Income
May 31, 2016
(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
Brittania, Inc.
Consolidated Balance Sheets
Jan. 3,
Jan. 4,
2016
2015
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
Brittania, Inc.
Consolidated Statement of Income
January 3, 2016
(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
