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Selected current year-end financial statements of Cabot Corporation follow

Accounting Jan 27, 2021

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, $47,900; total assets, $229,400; common stock, $82,000; and retained earnings, $43,074.) eBook CABOT CORPORATION Income Statement For Current Year Ended December 31 Sales $ 448,600 Cost of goods sold 298,150 Gross profit 150,450 Operating expenses 99,000 Interest expense 4,100 Income before taxes 47,350 Income tax expense 19,074 Net income $ 28,276 Print References $ Assets Cash Short-term investments Accounts receivable, net Merchandise inventory CABOT CORPORATION Balance Sheet December 31 Liabilities and Equity $ 22,000 Accounts payable 9,000 Accrued wages payable 30,200 Income taxes payable 36,150 Long-term note payable, secured by mortgage on plant assets 2,500 Common stock 150,300 Retained earnings $ 250,150 Total liabilities and equity 17,500 3,800 3,100 72,400 Prepaid expenses Plant assets, net Total assets 82,000 71,350 $ 250, 150 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 common stockholders' equity. (Do not round intermediate calculations.)
Complete this question by entering your answers in the tabs below. Req 1 and 2 Reg 3 Reg 4 Reg 5 Reg 6 Reg 7 Reg 8 Reg 9 Reg 10 Reg 11 Compute the return on common stockholders' equity. (11) Return on Common Stockholders' Equity 1 Choose Denominator 7 Average common stockholders' equity 1 Choose Numerator: Preferred dividends 28,276 - = Return On Common Stockholders' Equity = Return on common stockholders' equity Net income $ 0 %

Expert Solution

Return on common stockholders’ equity can be computed as a ratio of net income available to common stockholders’ to average common stockholders’ equity as follows

Particulars Amount
Net income $28,276
Deduct: Preferred dividends $0
Net income available to common stockholders $28,276
÷ Average common stockholders' equity $139,212
Return on common stockholders' equity 20.31%

Notes:  

Particulars Amount
Stockholders' equity beginning balance ($82,000 + 43,074) $125,074
Stockholders' equity ending balance ($82,000 + 71,350) $153,350
Total $278,424
÷ Number of years 2
Average common stockholders' equity $139,212
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