Ac 202
Problem 17-4A
1. Current ratio = 3.9 to 1
2. Acid-test ratio
= 2.3 to 1
3. Days' sales uncollected
x 365 = 33.2 days
4. Inventory turnover
= 7.2 times
5. Days’ sales in inventory
x 365 = 49.6 days
6. Debt-to-equity ratio
($16,500 + $2,200 + $2,300 + $62,400) / ($90,000 + $59,800) = 0.56 to 1
7. Times interest earned
$66,950 / $3,100 = 21.6 times
8. Profit margin ratio
= 13.8% Problem 17-4A (Concluded)
9. Total asset turnover
= 1.7 times
10. Return on total assets
= 23.1%
11. Return on common stockholders' equity
= 35.4%
Problem 17-5A
Part 1 Ryan Company Priest Company
a. Current ratio
= 2.5 to 1 = 2.5 to 1
b. Acid-test ratio
= 1.0 to 1 = 1.0 to 1
c. Accounts receivable turnover
= 18.0 times = 13.5 times
d. Inventory turnover
= 7.0 times = 4.5 times
e. Days’ sales in inventory
x 365 = 62.8 days x 365 = 90.1 days
f. Days' sales uncollected
x 365 = 24.6 days x 365 = 29.3 days
Short-term credit risk analysis: Ryan and Priest have essentially equal current ratios and equal acid-test ratios. However, Ryan both turns its merchandise and collects its accounts receivable more rapidly than does Priest. On this basis, Ryan probably is the better short-term credit risk. Problem 17-5A (Concluded)
Part 2 Ryan Company Priest Company
a. Profit margin ratio
= 10.3% = 13.5%
b. Total asset turnover
= 1.6 times = 1.7 times
c. Return on total assets
= 16.5% = 23.1%
d. Return on common stockholders' equity
= 24.0% = 32.8%
e. Price-earnings ratio
= 12.9 = 9.8
f. Dividend yield
1. Current ratio = 3.9 to 1
2. Acid-test ratio
= 2.3 to 1
3. Days' sales uncollected
x 365 = 33.2 days
4. Inventory turnover
= 7.2 times
5. Days’ sales in inventory
x 365 = 49.6 days
6. Debt-to-equity ratio
($16,500 + $2,200 + $2,300 + $62,400) / ($90,000 + $59,800) = 0.56 to 1
7. Times interest earned
$66,950 / $3,100 = 21.6 times
8. Profit margin ratio
= 13.8% Problem 17-4A (Concluded)
9. Total asset turnover
= 1.7 times
10. Return on total assets
= 23.1%
11. Return on common stockholders' equity
= 35.4%
Problem 17-5A
Part 1 Ryan Company Priest Company
a. Current ratio
= 2.5 to 1 = 2.5 to 1
b. Acid-test ratio
= 1.0 to 1 = 1.0 to 1
c. Accounts receivable turnover
= 18.0 times = 13.5 times
d. Inventory turnover
= 7.0 times = 4.5 times
e. Days’ sales in inventory
x 365 = 62.8 days x 365 = 90.1 days
f. Days' sales uncollected
x 365 = 24.6 days x 365 = 29.3 days
Short-term credit risk analysis: Ryan and Priest have essentially equal current ratios and equal acid-test ratios. However, Ryan both turns its merchandise and collects its accounts receivable more rapidly than does Priest. On this basis, Ryan probably is the better short-term credit risk. Problem 17-5A (Concluded)
Part 2 Ryan Company Priest Company
a. Profit margin ratio
= 10.3% = 13.5%
b. Total asset turnover
= 1.6 times = 1.7 times
c. Return on total assets
= 16.5% = 23.1%
d. Return on common stockholders' equity
= 24.0% = 32.8%
e. Price-earnings ratio
= 12.9 = 9.8
f. Dividend yield