Homework SourseRatios Appendix Miller Companys condensed income statement f
Ratios (Appendix)
Miller Company\'s condensed income statement for 2016 and December 31, 2016, balance sheet follow:
Additional information: The common stock was outstanding the entire year and is selling for $16 per share at year-end. On January 1, 2016, the inventory was $21,500, the total assets were $224,000, the accounts payable were $18,800, and the total shareholders\' equity was $130,800. The company operates on a 365-day business year.
Required
For the Miller Company, compute the following ratios:
Income Statement | ||
| Sales (net) | $304,400 | |
| Cost of goods sold | (183,600) | |
| Gross profit | $120,800 | |
| Operating expenses | (82,000) | |
| Operating income | $38,800 | |
| Interest expense | (7,000) | |
| Income before income taxes | $31,800 | |
| Income taxes | (10,000) | |
| Net income | 21,800 |
Solution
1. Gross profit margin = (Gross Profit/Net Sales) x 100 = ($120,800/$304,400) x 100 = 39.68%
2. Operating profit margin = (Operating Profit/Net Sales) x 100 = ($38,800/$304,400) x 100 = 12.74%
3. Net profit margin = (Net Profit/Net Sales) x 100 = ($21,800/$304,400) x 100 = 7.16%
4. Total asset turnover = Net sales/Average total assets = $304,400/(($224,000+$238,000)/2) = 0.91times
5. Return on total assets = (EBIT/Total net assets) x 100 = ($38,800/($238,000-$94,800)) x 100 = 27.09%
6. Return on common equity = (Net Income/Total Average Equity) x 100 = ($21,800/($130,800+$143,200)/2) x 100
= 15.91%
7. Current ratio = Current Assets/Current liabilities = $42,200/$24,800 = 1.7
8. Inventory turnover days = (365 x Average inventory)/Net sales = (365 x (($21,500+$19,300)/2))/$304,400
= 24 days
9. Payables turnover days = (365 x Average payables)/Net sales = (365 x (($18,800+$18,000)/2))/$304,400
22 days
