60.1K

Verified Solution

Link Copied!

Note: some answers I have already gotten correct. The blank ones in the final chart are what is needed. Thanks!

Required

Calculate the following ratios for Year 4 and Year 3. Since Year 2 numbers are not presented do not use averages when calculating the ratios for Year 3. Instead, use the number presented on the Year 3 balance sheet. Note: Round ratio answers to 2 decimal places unless otherwise indicated.

1. Working capital.
2. Current ratio.
3. Quick ratio.
4. Receivables turnover (beginning receivables at January 1, Year 3, were $50,000).
5. Average days to collect accounts receivable.

   Note: Use 365 days in a year. Round your intermediate calculations to 2 decimal places and your final answers to the nearest whole number.

6. Inventory turnover (beginning inventory at January 1, Year 3, was $156,000).
7. Number of days to sell inventory.

   Note: Use 365 days in a year. Round your intermediate calculations to 2 decimal places and your final answers to the nearest whole number.

8. Debt-to-assets ratio.

   Note: Round your answers to the nearest whole percent.

9. Debt-to-equity ratio.
10. Number of times interest was earned.
11. Plant assets to long-term debt.
12. Net margin.
13. Turnover of assets (average total assets in Year 3 is $551,600).
14. Return on investment (average total assets in Year 3 is $551,600).
15. Return on equity (average stockholders' equity in Year 3 is $249,300).
16. Earnings per share (total shares outstanding is unchanged).
17. Book value per share of common stock.
18. Price-earnings ratio (market price per share: Year 3, $12.55; Year 4, $14.10).

    Note: Round your intermediate calculations and final answer to 2 decimal places.

19. Dividend yield on common stock.

Financial statements for Thornton Company follow.

THORNTON COMPANY
Balance Sheets As of December 31
	Year 4	Year 3
Assets
Current assets
Cash	$ 24,000	$ 20,000
Marketable securities	21,600	7,600
Accounts receivable (net)	57,000	49,000
Inventories	142,000	150,000
Prepaid items	26,000	11,000
Total current assets	270,600	237,600
Investments	22,000	15,000
Plant (net)	290,000	275,000
Land	29,000	24,000
Total assets	$ 611,600	$ 551,600
Liabilities and Stockholders Equity
Liabilities
Current liabilities
Notes payable	$ 40,000	$ 17,300
Accounts payable	113,800	100,000
Salaries payable	25,000	19,000
Total current liabilities	178,800	136,300
Noncurrent liabilities
Bonds payable	140,000	140,000
Other	31,000	26,000
Total noncurrent liabilities	171,000	166,000
Total liabilities	349,800	302,300
Stockholders equity
Preferred stock, (par value $10, 4% cumulative, non-participating; 6,000 shares authorized and issued)	60,000	60,000
Common stock (no par; 50,000 shares authorized; 10,000 shares issued)	60,000	60,000
Retained earnings	141,800	129,300
Total stockholders equity	261,800	249,300
Total liabilities and stockholders equity	$ 611,600	$ 551,600

THORNTON COMPANY
Statements of Income and Retained Earnings For the Years Ended December 31
	Year 4	Year 3
Revenues
Sales (net)	$ 390,000	$ 370,000
Other revenues	11,200	8,200
Total revenues	401,200	378,200
Expenses
Cost of goods sold	195,000	151,000
Selling, general, and administrative	71,000	66,000
Interest expense	12,800	12,000
Income tax expense	103,000	102,000
Total expenses	381,800	331,000
Net earnings (net income)	19,400	47,200
Retained earnings, January 1	129,300	89,000
Less: Preferred stock dividends	2,400	2,400
Common stock dividends	4,500	4,500
Retained earnings, December 31	$ 141,800	$ 129,300

Year 4 Year 3 a. Working capital $91,800 $101,300 b. Current ratio 1.51 1.74 c. Quick ratio d. Receivables turnover (beginning receivables at January 1, Year 3, were $50,000) 7.36 times times e. Average days to collect accounts receivable 50 days days f. Inventory turnover (beginning inventory at January 1, Year 3, was $156,000) 1.34 times times g. Number of days to sell inventory 273 days days h. Debt-to-assets ratio 57 % 55 % i. Debt-to-equity ratio 1.34 1.21 j. Number of times interest was earned 10.56 times 13.43 times k. Plant assets to long-term debt l. Net margin % % m. Turnover of assets (average total assets in Year 3 is $551,600) n. Return on investment (average total assets in Year 3 is $551,600) % % o. Return on equity (average stockholders' equity in Year 3 is $249,300) 7.59 % % p. Earnings per share (total shares outstanding is unchanged) 1.70 per share 4.48 per share q. Book value per share of common stock 20.18 per share 18.93 per share r. Price-earnings ratio (market price per share: Year 3, $12.55; Year 4, $14.10) s. Dividend yield on common stock % %

Answer & Explanation Solved by verified expert

See Answer