Assets Cash Short-term investments Accounts receivable, net Merchandise inventory Prepaid expenses Plant assets, net Total assets CABOT CORPORATION Income Statement Sales Cost of goods sold Gross profit For Current Year Ended December 31 $ 448,600 297,950 Operating expenses Interest expense Income before taxes Income tax expense Net income $ 18,000 Accounts payable 8,400 Accrued wages payable 30,400 Income taxes payable CABOT CORPORATION Balance Sheet December 31 of current year Liabilities and Equity 34,150 Long-term note payable, secured by mortgage on plant assets 2,750 Common stock 150,300 Retained earnings $ 244,000 Total liabilities and equity 150,650 98,700 4,200 47,750 19,236 $ 28,514 $ 18,500 4,000 3,200 72,400 81,000 64,900 $ 244,000 Required: Compute the following: (1) current ratio, (2) acid-test ratio, (3) days' sales uncollected, (4) inventory turnover, (5) days' sales in inventory, 6) debt-to-equity ratio, (7) times interest earned, (8) profit margin ratio, (9) total asset turnover, (10) return on total assets, and (11) return on equity.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Req 1 and 2 Req 3
Compute the days' sales uncollected.
(3)
Req 1 and 2 Req 3
Req 1 and 2
Numerator:
Req 1 and 2
Req 4
Compute the inventory turnover.
(4)
(6)
Numerator:
Req 3
Compute the days' sales in inventory.
(5)
Numerator:
Req 3
Req 5
Req 4
Req 4
Numerator:
Compute the debt-to-equity ratio.
Req 4
1
1
1
I
1
1
Req 6
1
1
1
Req 5
Days' Sales Uncollected
Denominator:
Req 5
Req 7
< Req 1 and 2
Req 6
Inventory Turnover
Denominator:
< Req 3
Req 5
Req 6
Req 8
Days' Sales in Inventory.
Denominator:
< Req 4
Req 7
Req 6
Debt-to-Equity Ratio
Denominator:
Req 9
Days
Req 4 >
Req 7
11
11
Req 8
Req 7
x Days =
=
Req 5 >
Req 6 >
11
Req 10
11
Req 8
Days Sales Uncollected
Days sales uncollected
days
Inventory Turnover
Inventory turnover
times
Req 11
Req 9
Req 9
Req 8
Req 10
Days' Sales in Inventory
Days' sales in inventory
days
Req 9
Debt-to-Equity Ratio
Debt-to-equity ratio
to 1
Transcribed Image Text:Req 1 and 2 Req 3 Compute the days' sales uncollected. (3) Req 1 and 2 Req 3 Req 1 and 2 Numerator: Req 1 and 2 Req 4 Compute the inventory turnover. (4) (6) Numerator: Req 3 Compute the days' sales in inventory. (5) Numerator: Req 3 Req 5 Req 4 Req 4 Numerator: Compute the debt-to-equity ratio. Req 4 1 1 1 I 1 1 Req 6 1 1 1 Req 5 Days' Sales Uncollected Denominator: Req 5 Req 7 < Req 1 and 2 Req 6 Inventory Turnover Denominator: < Req 3 Req 5 Req 6 Req 8 Days' Sales in Inventory. Denominator: < Req 4 Req 7 Req 6 Debt-to-Equity Ratio Denominator: Req 9 Days Req 4 > Req 7 11 11 Req 8 Req 7 x Days = = Req 5 > Req 6 > 11 Req 10 11 Req 8 Days Sales Uncollected Days sales uncollected days Inventory Turnover Inventory turnover times Req 11 Req 9 Req 9 Req 8 Req 10 Days' Sales in Inventory Days' sales in inventory days Req 9 Debt-to-Equity Ratio Debt-to-equity ratio to 1
Selected current year-end financial statements of Cabot Corporation follow. (All sales were on credit; selected balance sheet amounts
at December 31 of the prior year were inventory, $51,900; total assets, $249,400; common stock, $81,000; and retained earnings,
$36,386.)
Assets
Cash
Short-term investments
Accounts receivable, net
Merchandise inventory
Prepaid expenses
Plant assets, net
Total assets
CABOT CORPORATION
Income Statement
For Current Year Ended December 31
Sales
$ 448,600
Cost of goods sold
297,950
Gross profit
150,650
98,700
4,200
47,750
19,236
$ 28,514
Operating expenses
Interest expense
Income before taxes
Income tax expense
Net income
CABOT CORPORATION
Balance Sheet
December 31 of current year
Liabilities and Equity
$ 18,000
8,400
30,400 Income taxes payable
34,150 Long-term note payable, secured by mortgage on plant assets
Common stock
2,750
150,300 Retained earnings
$244,000 Total liabilities and equity
Accounts payable
Accrued wages payable
$ 18,500
4,000
3,200
72,400
81,000
64,900
$ 244,000
Required:
Compute the following: (1) current ratio, (2) acid-test ratio, (3) days' sales uncollected, (4) inventory turnover, (5) days' sales in inventory,
(6) debt-to-equity ratio, (7) times interest earned, (8) profit margin ratio, (9) total asset turnover, (10) return on total assets, and (11) return
on equity.
Note: Do not round intermediate calculations.
Transcribed Image Text:Selected current year-end financial statements of Cabot Corporation follow. (All sales were on credit; selected balance sheet amounts at December 31 of the prior year were inventory, $51,900; total assets, $249,400; common stock, $81,000; and retained earnings, $36,386.) Assets Cash Short-term investments Accounts receivable, net Merchandise inventory Prepaid expenses Plant assets, net Total assets CABOT CORPORATION Income Statement For Current Year Ended December 31 Sales $ 448,600 Cost of goods sold 297,950 Gross profit 150,650 98,700 4,200 47,750 19,236 $ 28,514 Operating expenses Interest expense Income before taxes Income tax expense Net income CABOT CORPORATION Balance Sheet December 31 of current year Liabilities and Equity $ 18,000 8,400 30,400 Income taxes payable 34,150 Long-term note payable, secured by mortgage on plant assets Common stock 2,750 150,300 Retained earnings $244,000 Total liabilities and equity Accounts payable Accrued wages payable $ 18,500 4,000 3,200 72,400 81,000 64,900 $ 244,000 Required: Compute the following: (1) current ratio, (2) acid-test ratio, (3) days' sales uncollected, (4) inventory turnover, (5) days' sales in inventory, (6) debt-to-equity ratio, (7) times interest earned, (8) profit margin ratio, (9) total asset turnover, (10) return on total assets, and (11) return on equity. Note: Do not round intermediate calculations.
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