Question & Answer: he comparative statements of Corbin Company are presented b…..

Problem 14-6A

The comparative statements of Corbin Company are presented below.

CORBIN COMPANY Income Statement For the Years Ended December 31
	2017	2016
Net sales (all on account)	$600,500	$520,200
Expenses
Cost of goods sold	414,600	354,200
Selling and administrative	119,900	113,300
Interest expense	8,200	5,100
Income tax expense	17,100	14,700
Total expenses	559,800	487,300
Net income	$ 40,700	$ 32,900

CORBIN COMPANY Balance Sheets December 31
Assets	2017	2016
Current assets
Cash	$ 21,100	$ 17,600
Short-term investments	17,100	15,200
Accounts receivable (net)	86,100	73,000
Inventory	89,400	70,100
Total current assets	213,700	175,900
Plant assets (net)	423,800	383,200
Total assets	$637,500	$559,100
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable	$121,600	$110,200
Income taxes payable	22,500	20,900
Total current liabilities	144,100	131,100
Long-term liabilities
Bonds payable	120,600	79,800
Total liabilities	264,700	210,900
Stockholders’ equity
Common stock ($5 par)	151,200	151,200
Retained earnings	221,600	197,000
Total stockholders’ equity	372,800	348,200
Total liabilities and stockholders’ equity	$637,500	$559,100

Additional data:

The common stock recently sold at $19.97 per share.

Compute the following ratios for 2017. (Round Acid-test ratio and Earnings per share to 2 decimal places, e.g. 1.65, and all other answers to 1 decimal place, e.g. 6.8 or 6.8%.)

(a)	Current ratio.		:1
(b)	Acid-test ratio.		:1
(c)	Accounts receivable turnover.		times
(d)	Inventory turnover.		times
(e)	Profit margin.		%
(f)	Asset turnover.		times
(g)	Return on assets.		%
(h)	Return on common stockholders’ equity.		%
(i)	Earnings per share.	$
(j)	Price-earnings ratio.		times
(k)	Payout ratio.		%
(l)	Debt to assets ratio.		%
(m)	Times interest earned.		times

Expert Answer

Ratio Analysis

current ratio	current assets/current liabilities	1.48
current assets	213,700
current liabilities	144,100

Acid test ratio	quick assets/current liabilities	0.86
quick assets= current assets-inventory	124,300
current liabilities	144,100

accounts receivable turnover	sales/average accounts receivables	7.5
sales	600500
accounts receivables 2016	2017	86,100
accounts receivables 2016		73000
average accounts receivables = opening balance+closing balance /2		79550

Inventory turnover ratio	cost of goods sold/average inventory	5.2
cost of goods sold	414600
average inventory = 89400+70100 / 2	79750

profit margin	net income/ sales	6.8%
net income	40700
sales	600500

Asset turnover	sales/average assets	1.0
sales	600500
average assets = 637500+559100 /2	598300

return on assets	net income/average assets	6.8%
average assets = 637500+559100 /2	598300
net income	40700

Return on common stockholders’ equity.	net income/average equity	11.3%
net income	40700
average equity = 372800+348200 /2	360500


earning per share	net income /no of shares	1.346
net income	40700
no of equity shares = 151200/5	30240

PE RATIO	market price/eps	14.8
eps	1.3458995
market price	19.97

Pay out ratio	Dividend paid per share/EPS
Dividend paid per share	Not given
EPS	1.3458995

debt to asset ratio	total of debt/total assets	0.4
total debt or liabilities	264700
total assets	637500

times interest earned	EBIT/interest	8.0
EBIT	66000
Interest	8200

EBIT= sales-cogs-selling expenses	600500-414600-119900	66000

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