Here are simplified financial statements for Phone Corporation in a recent year:   INCOME STATEMENT(Figures in $ millions)Net sales$14,000Cost of goods sold 4,510Other expenses 4,212Depreciation 2,788Earnings before interest and taxes (EBIT)$2,490Interest expense 730Income before tax$1,760Taxes (at 30%) 528Net income$1,232Dividends$946    BALANCE SHEET(Figures in $ millions) End of Year Start of YearAssets       Cash and marketable securities$98  $167 Receivables 2,832   2,670 Inventories 232   283 Other current assets 912   977 Total current assets$4,074  $4,097 Net property, plant, and equipment 20,063   20,005 Other long-term assets 4,306   3,860 Total assets$28,443  $27,962 Liabilities and shareholders' equity       Payables$2,654  $3,130 Short-term debt 1,464   1,618 Other current liabilities 856   832 Total current liabilities$4,974  $5,580 Long-term debt and leases 4,777   5,222 Other long-term liabilities 6,268   6,239 Shareholders' equity 12,424   10,921 Total liabilities and shareholders' equity$28,443  $27,962    Calculate the following financial ratios for Phone Corporation: (Use 365 days in a year

Net Operating Profit after tax = EBIT * (1 - Tax Rate)
Net Operating Profit after tax = $2,490 * (1 - 0.30)
Net Operating Profit after tax = $1,743

a) Return on Equity:

Average Stockholders' Equity = ($12,424 + $10,921) / 2
Average Stockholders' Equity = $11,672.50

Return on Equity = Net Income / Average Stockholders' Equity
Return on Equity = $1,232 / $11672.50
Return on Equity = 10.55%

b) Return on Assets:

Average Total Assets = ($28,443 + $27,962) / 2
Average Total Assets = $28,202.50

Return on Assets = Net Operating Profit after tax / Average Total Assets
Return on Assets = $1,743 / $28,202.50
Return on Assets = 6.18%

c) Return on Capital:

Average Capital = Average Long-term Debt and Leases + Average Stockholders' Equity
Average Capital = ($4,777 + $5,222) / 2 + ($12,424 + $10,921) / 2
Average Capital = $16,672

Return on Capital = Net Operating Profit after tax / Average Capital
Return on Capital = $1,743 / $16,672
Return on Capital = 10.45%

d) Days in Inventory)

Days in Inventory = 365 * Inventory / Cost of Goods Sold
Days in Inventory = 365 * $283/ $4,510
Days in Inventory = 22.90 days

e) Inventory Turnover:

Inventory Turnover = Cost of Goods Sold / Inventory
Inventory Turnover = $4,510 / $283
Inventory Turnover = 15.94 times

f) Average Collection Period:

Average Collection Period = 365 * Receivables / Net Sales
Average Collection Period = 365 * $2,670 / $14,000
Average Collection Period = 69.61 days

g) Operating Profit Margin:

Operating Profit Margin = Earnings before Interest and Taxes / Net Sales
Operating Profit Margin = $2,490 / $14,000
Operating Profit Margin = 17.79%

h) Long-term Debt Ratio:

Long-term debt ratio = Long-term debt and leases / [Long-term debt and leases + Shareholders' equity]
Long-term debt ratio = $4,777 / [$4,777 + $12,424]
Long-term debt ratio = $4,777 / $17,201
Long-term debt ratio = 0.28

i) Total Debt Ratio:

Total debt ratio = [Current liabilities + Long-term debt and leases + Other long-term liabilities] / Total assets
Total debt ratio = [$4,974 + $4,777 + $6,268] / $28,443
Total debt ratio = $16,019 / $28,443
Total debt ratio = 0.56

j) Times Interest Earned:

Times interest earned = Earnings before interest and taxes / Interest expense
Times interest earned = $2,490 / $730
Times interest earned = 3.41

k) Cash Coverage Ratio:

Cash coverage ratio = [Earnings before interest and taxes + Depreciation] / Interest expense
Cash coverage ratio = [$2,490 + $2,788] / $730
Cash coverage ratio = $5,278 / $730
Cash coverage ratio = 7.23

i) Current Ratio:

Current ratio = Current assets / Current liabilities
Current ratio = $4,074 / $4,974
Current ratio = 0.82

m) Quick Ratio:

Quick ratio = [Cash and marketable securities + Receivables] / Current liabilities
Quick ratio = [$98 + $2,832] / $4,974
Quick ratio = $2,930 / $4,974
Quick ratio = 0.59