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Homework answers / question archive / Here are simplified financial statements for Phone Corporation in a recent year: INCOME STATEMENT (Figures in $ millions) Net sales Cost of goods sold Other expenses Depreciation Earnings before interest and taxes (EBIT) Interest expense Income before tax Taxes (at 35%) Net income Dividends $ 12,900 3,910 4,132 2,428 $ 2,430 670 $ 1,760 616 $ 1,144 $ 846 BALANCE SHEET (Figures in $ millions) End of Year Start of Year 86 Assets Cash and marketable securities Receivables Inventories Other current assets Total current assets Net property, plant, and equipment Other long-term assets Total assets 2,232 172 8

Here are simplified financial statements for Phone Corporation in a recent year: INCOME STATEMENT (Figures in $ millions) Net sales Cost of goods sold Other expenses Depreciation Earnings before interest and taxes (EBIT) Interest expense Income before tax Taxes (at 35%) Net income Dividends $ 12,900 3,910 4,132 2,428 $ 2,430 670 $ 1,760 616 $ 1,144 $ 846 BALANCE SHEET (Figures in $ millions) End of Year Start of Year 86 Assets Cash and marketable securities Receivables Inventories Other current assets Total current assets Net property, plant, and equipment Other long-term assets Total assets 2,232 172 8

Finance

Here are simplified financial statements for Phone Corporation in a recent year: INCOME STATEMENT (Figures in $ millions) Net sales Cost of goods sold Other expenses Depreciation Earnings before interest and taxes (EBIT) Interest expense Income before tax Taxes (at 35%) Net income Dividends $ 12,900 3,910 4,132 2,428 $ 2,430 670 $ 1,760 616 $ 1,144 $ 846 BALANCE SHEET (Figures in $ millions) End of Year Start of Year 86 Assets Cash and marketable securities Receivables Inventories Other current assets Total current assets Net property, plant, and equipment Other long-term assets Total assets 2,232 172 8.52 S 3,342 19,943 4,186 $ 27,471 S 155 2,430 223 917 S 3,725 19,885 3,740 $ 27,350
Liabilities and shareholders' equity Payables Short-term debt Other current liabilities Total current liabilities Long-term debt and leases Other long-term liabilities Shareholders' equity Total liabilities and shareholders' equity $ 2,534 1,404 796 $ 4,734 7,765 6,148 8,824 $ 27,471 3,010 1,558 772 $ 5,340 7,370 6,119 8,521 $ 27,350 Calculate the following financial ratios for Phone Corporation: (Use 365 days in a year. Do not round intermediate cale Round your final answers to 2 decimal places.) % % % days a. Return on equity (use average balance sheet figures) b. Return on assets (use average balance sheet figures) c. Return on capital (use average balance sheet figures) d. Days in inventory (use start-of-year balance sheet figures) e Inventory turnover (use start-of-year balance sheet figures) 1 Average collection period (use start-of-year balance sheet figures) 9. Operating profit margin h. Long-term debt ratio (use end-of-year balance sheet figures) Total debt ratio (use end-of-year balance sheet figures) days %
J. Times interest eamed k. Cash coverage ratio 1. Current ratio (use end-of-year balance sheet figures) m. Quick ratio (use end-of-year balance sheet figures)

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Return on equity (ROE) = (net profit/ Equity) * 100

Net profit = 1,144

Equity = (8824 + 8521) / 2 = 8672.5 (average)

so ROE = (1144 / 8672.5) * 100 = 13.19%

Return on Asset (ROA) = (Net Profit / Total Assets) *100

Net Profit = 1,144

Total assets = (27471 + 27350) / 2 = 27410.5 (average)

so ROA = (1144 / 27410.5 ) *100 = 4.17%

Return on Capital (ROC) = EBIT / Capital employed * 100

EBIT = 2,430

Capital employed = (Total Assets - Current liability)

Total asset = 27410.5

Current liability = (4734 + 5340) / 2 = 5037 (average)

Capital employed = 27410.5 - 5037 = 22373.5

So, ROC = (2430 / 22373.5) * 100 = 10.86%

Inventory Days = 365 / inventory turnover

Inventory turnover =cost of goods sold / inventory

cost of goods sold = 3,910

inventory = 223 (start of the year figure )

inventory turnover = 3910 / 223 = 17.533

So, Inventory Days = 365 / 17.533 =20.8 = 21 days

Inventory turnover =cost of goods sold / inventory

cost of goods sold = 3,910

inventory = 223 (start of the year figure )

inventory turnover = 3910 / 223 = 17.533

Average collection period = 365 / Receivable turnover

Receivable turnover = (sales/ receivable)

sales = 12,900

receivable = 2430 (start of the year figure)

Receivable turnover = (12900 / 2430) = 5.3086

Average collection period = 365 / 5.3086 = 68.75 = 69 days

Operating profit margin = (operating income / net sale) * 100

Operating Income = Sales– (Operating Expenses + COGS)

sales = 12900

operating expenses = 4132

COGS = 3910

Operating Income = 12900 - ( 4132 + 3910 ) = 4858

Operating profit margin = (4858 / 12900) * 100 = 37.66%

Long Term Debt Ratio (LTD) = (Long-Term Debt? / TotalAssets) * 100

Long term debt = 7,765 (end of the year figure)

total assets = 27471 (End of the year data)

So, LTD = (7765 / 27471) * 100 = 28.26%

Total Debt Ratio = (Total Debt / Total Asset ) * 100

total debt = (long term debt + short term debt) = 7765 + 1404 = 9169 (End of the year data)

total assets = 27471 (End of the year data)

Total debt ratio = ( 9169 / 27471 ) * 100 = 33.38%

Times interest earned = (EBIT / Total interest)

EBIT = 2430

Interest = 670

So, Time interest earned = 3.63 Times

Cash Coverage Ratio (CCR) = (EBIT+Depreciation) / interest

EBIT = 2430

Depreciation = 2428

interest = 670

So, CCR = (2430 + 2428 ) / 670 = 7.25

Current ratio = Current assets / current liability

Current assets = 3342

Current Liability = 4734

So, Current ratio = 3342 / 4734 = 0.71 : 1

Quick Ratio = (Current assets - Current inventory) / Current liabilities

Current assets = 3342

current inventory = 172

Current Liability = 4734

So, Quick Ratio = (3342 - 172) / 4734 = 0.67 : 1