Problem 132A The comparative statements of Carla Vista Co ar

Problem 13-2A

The comparative statements of Carla Vista Co. are presented here.

CARLA VISTA CO.
Income Statements
For the Years Ended December 31

2017

2016

$1,898,540

$1,758,500

1,066,540

1,014,000

832,000

744,500

508,000

487,000

324,000

257,500

23,700

21,700

300,300

235,800

93,700

74,700

$ 206,600

$ 161,100

CARLA VISTA CO.
Balance Sheets
December 31

Assets

2017

2016

$ 60,100

$ 64,200

74,000

50,000

125,800

110,800

127,700

117,200

387,600

342,200

664,000

535,300

$1,051,600

$877,500

Liabilities and Stockholders’ Equity

$ 168,000

$153,400

45,200

43,700

213,200

197,100

235,000

215,000

448,200

412,100

290,000

300,000

313,400

165,400

603,400

465,400

$1,051,600

$877,500

All sales were on account. Net cash provided by operating activities for 2017 was $229,000. Capital expenditures were $137,000, and cash dividends were $58,600.

Compute the following ratios for 2017. (Round all answers to 2 decimal places, e.g. 1.83 or 1.83%.)

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Solution

(a) Earnings per share

Earnings per share         = [ Net Income / Weighted Average number of common shares ]

= $206,600 / [ (58,000 Shares + 60,000 Shares) / 2 ]

= $206,600 / 59,000 Shares

= $3.50 per share

(b) Return on common stockholders’ equity       

Return on common stockholders’ equity = [ Net Income / Average common stockholders’ equity ]

= [ $206,600 / { (603,400 + 465,400) /2} ] x 100

= 38.66%

(c) Return on assets

Return on assets   = [ Net Income / Average Total Assets ]

= [ $206,600 / { (10,51,600 + 877,500 /2} ] x 100

= 21.42%

(d) Current ratio

Current ratio        = Total Current Assets / Total Current Liabilities

= $387,600 / 213,200

= 1.82 : 1

(e) Accounts receivable turnover

Accounts receivable turnover = Net Sales / Average Accounts Receivable

= $1,898,540 / [ (125,800 + 110,800) / 2 ]

= 16.05 Times

(f) Average collection period

Average collection period = 365 Days / 16.05 Times

= 22.74 Days

(g) Inventory turnover

Inventory turnover = Cost of goods sold /Average Inventory

= $10,66,540 / [ (127,700 + 117,200 ) / 2 ]

= 8.71 Times

(h) Days in inventory

Days in inventory = 365 Days / Inventory turnover

= 365 Days / 8.71

= 41.91 Days

(i) Times interest earned

Times interest earned = [ Net Income + Income Tax + Interest Expenses ] / Interest Expenses

= [ 206,600 + 93,700 + 23,700 ] / 23,700

= 13.68 Times

(j)Asset turnover

Asset turnover = Sales / Average Total Assets

= $18,98,540 / { (10,51,600 + 877,500 /2}

= 1.97 Times

(k) Debt to assets ratio

Debt to assets ratio = Total Debt / Total Assets

= 448,200 / $1,051,600

= 42.62%

(l) Free cash flow

Free cash flow = Net cash provided by operating activities - Capital expenditures - cash dividends

= $229,000 – 137,000 – 58,600

= $ 33,400