Do It Review 133 Your answer is incorrect Try again The con

Do It! Review 13-3 [ Your answer is incorrect. Try again. The condensed financial statements of Crane Company for the years 2016 and 2017 are presented as follows. (Amounts in thousands.) CRANE COMPANY Balance Sheets December 31 017 2016 Current assets Cash and cash equivalents Accounts receivable (net) Inventory Prepaid expenses $330 620 600 120 $360 550 530 160 1,670 1,600 160 380 510 $2,780 $2,650 $940 520 1,180 1,190 $2.780 $2,650 Total current assets Investments Property, plant, and equipment (net) Intangibles and other assets 160 420 530 Total assets Current liabilities Long-term liabilities Stockholders\' equity common $1,050 550 Total liabilities and stockholders equity CRANE COMPANY riacy Pollcy I 8.2000:2018 1chn Wiley & Sons, Inc. All Rights Reserved. A Division of 2ohn Wiley & Sons, Inc

Solution

2017   2016

1. Current Ratio

Current Assets/ Current Liability = 1670/1050 1600/940

1.59 :1 1.70 : 1

2. Inventory Turnover Ratio

Cost of Good Sold/ Average Stock= 1105 / 565 1040 / 460

1.96 2.26

W.N 1 : Calculation of Average Stock

Average Stock = (Opening Stock + Closing Stock)/2

  2016 = (390 + 530)/2 = 460

2017= ( 530 + 600)/2 = 565  

3. Profit Margin

A. Gross Profit Margin

(Net Sales - COGS)/ Net Sales (3940- 1105)/3940 (3600-1040)/3600

0.720 0.711

72.00% 71.10%

B. Operating Profit Margin

Operating Income/Net Sales 435/3940 230/3600

0.110 0.064

11.00% 6.40%

W.N 2 : Calculating of operating profit

Operating profit = (Net sales- COGS- Selling & Adminstartive Exp)

2016 = (3600 - 1040 - 2330) = 230

2017 = (3940 - 1105 - 2400) = 435

C. Net Profit Margin

Net Profit/Net Sales 287/3940 147/3600

0.073 0.041

7.30% 4.10%

4. Return on Asset

Net Income/Avergae Total Asset 287/2715 147/2670

0.106 0.055

10.60% 5.50%

W.N 3 : Calculation of Average Total Asset

Average Total Asset = (Opening Total Asset + Closing Total Asset)/2

2016  = (2690 + 2650)/2 = 2670

2017 = (2650 + 2780)/2 = 2715

5. Return on Common Stockholder( Equity)

Net Income/ Shareholder\'s Equity 3940/1180 3600/1190

3.34 3.03

334.00% 303.00%

6. Debt to Asset Ratio

(STD + LTD)/ Total Assets (1050 + 550)/2780 (940 + 520)/2650

0.5755 0.5509

57.55% 55.09%

STD = Short Term Debt

LTD = Long Term Debt

7. Times Interest Earned

EBIT/ Interest Expense 435/25 230/20

17.4 times 11.5 times

W.N 4 : Calculation of EBIT

EBIT = (Net sales- COGS- Selling & Adminstartive Exp)

2016 = (3600 - 1040 - 2330) = 230

2017 = (3940 - 1105 - 2400) = 435