Some recent financial statements for Smolira Golf Corp. follow. SMOLIRA GOLF CORP.
2014 and 2015 Balance Sheets
Assets Liabilities and Owners’ Equity
2014 2015 2014 2015
Current assets Current liabilities
Cash $ 24,236 $26,000 Accounts payable $25,084 $29,000
Accounts receivable 14,348 17,100 Notes payable 19,000 12,700
Inventory 27,892 29,000 Other 13,471 18,300
Total $ 66,476 $72,100 Total $ 57,555 $60,000
Long-term debt $ 88,000 $99,000
Owners’ equity
Common stock and paid-in surplus $45,000 $45,000
Accumulated retained earnings 219,616 233,000
Fixed assets
Net plant and equipment $343,695 $364,900 Total $264,616 $278,000
Total assets 410,171 $437,00 Total liabilities and owners’ equity
$410,171 $437,000
SMOLIRA GOLF CORP.
2015 Income Statement
Sales $ 392,640
Cost of goods sold 257,000
Depreciation 48,800
Earnings before interest and taxes $86,840
Interest paid 16,200
Taxable income $70,640
Taxes (40%) 28,256
Net income $ 42,384
Dividends $ 29,000
Retained earnings 13,384
Find the following financial ratios for Smolira Golf Corp. (use year-end figures rather than average values where appropriate): (Enter your profitability ratio answers as a percent rounded to 2 decimal places, e. g., 32.16. Round the remaining answers to 2 decimal places, e. g., 32.16.)
Short-term solvency ratios: 2014 2015
a. Current ratio times times
b. Quick ratio times times
c. Cash ratio times times
Asset utilization ratios:
d. Total asset turnover times
e. Inventory turnover times
f. Receivables turnover times
Long-term solvency ratios: 2014 2015
g. Total debt ratio times times
h. Debt–equity ratio times times
i. Equity multiplier times times
j. Times interest earned times
k. Cash coverage ratio times
Profitability ratios:
I. Profit margin %
m. Return on assets %
n. Return on equity %

Smolira Golf Corp.

Short-term solvency ratios:       2014              2015

a. Current ratio                           1.15 times      1.20 times

b. Quick ratio                            0.67 times      0.72 times

c. Cash ratio                             0.42 times      0.43 times

Asset utilization ratios:

d. Total asset turnover times                         0.90 times  

e. Inventory turnover times                            9.03 times

f. Receivables turnover times                      24.97 times

Long-term solvency ratios:                  2014             2015

g. Total debt ratio times times         0.35 times     0.36 times

h. Debt–equity ratio times times     0.55 times     0.57 times

i. Equity multiplier times times         0.65 times     0.64 times

j. Times interest earned times        5.36 times

k. Cash coverage ratio times          1.50 times

Profitability ratios:

I. Profit margin %            = 10.79%

m. Return on assets %   = 9.70%

n. Return on equity %    = 15.25%

Explanation:

a) Data and Calculations:

SMOLIRA GOLF CORP.

2014 and 2015 Balance Sheets

Assets                                                    

                                           2014          2015  

Current assets                                      

Cash                             $24,236     $26,000

Accounts receivable      14,348           17,100

Inventory                       27,892        29,000

Total current assets  $ 66,476       $72,100

Fixed assets

Net plant &

 equipment             $343,695   $364,900

Total assets                  410,171      $437,000

Liabilities and equity

Current liabilities:

Accounts payable       $25,084      $29,000

Notes payable               19,000          12,700

Other current liabilities  13,471          18,300

Total                          $ 57,555      $60,000

Long-term debt        $ 88,000      $99,000

Total                         $145,555    $159,000

Owners’ equity:

Common stock and

paid-in surplus        $45,000       $45,000

Accumulated

 retained earnings    219,616      233,000

Total liabilities and

owners’ equity         $410,171     $437,000

SMOLIRA GOLF CORP.

2015 Income Statement

Sales                      $ 392,640

Cost of goods sold  257,000

Depreciation              48,800

Earnings before

 interest and taxes $86,840

Interest paid              16,200

Taxable income      $70,640

Taxes (40%)              28,256

Net income            $ 42,384

Dividends              $ 29,000

Retained earnings     13,384

Short-term solvency ratios:             2014                      2015

a. Current ratio times times      $ 66,476/$ 57,555    $72,100/$60,000

                                                                    1.15 times      1.20 times

Current assets/Current liabilities

b. Quick ratio times times       $38,584/$57,555       $43,100/$60,000

                                                                  0.67 times        0.72 times

= (Current assets- Inventory)/Current liabilities

c. Cash ratio times times           $24,236/$57,5555     $26,000/$60,000

                                                                 0.42 times        0.43 times

Cash ratio = Cash/Current liabilities

Asset utilization ratios:

d. Total asset turnover times = Sales/Total asset = $ 392,640/$437,000 = 0.90 times

e. Inventory turnover times = Cost of goods sold/Average Inventory = $257,000/$28,446 = 9.03 times

f. Receivables turnover times = Sales/Average Receivable = $392,640/$15,724 = 24.97 times

Long-term solvency ratios:            2014               2015

g. Total debt ratio times times = Total Debt/Total Assets

=                                             $145,555/$410,171    $159,000/$437,000

=                                                   0.35 times              0.36 times

h. Debt–equity ratio times times

=                                                   $145,555/$264,616   $159,000/$278,000

=                                                      0.55 times                 0.57 times

i. Equity multiplier times times    

=                                                $264,616/$410,171    $278,000/$437.000

=                                                      0.65 times                0.64 times

= Equity/Assets

j. Times interest earned times     $86,840/$16,200

=                                                      5.36 times

= EBIT/Interest Expense

k. Cash coverage ratio times      = $24,236/$16,200 = 1.50 times

Profitability ratios:

I. Profit margin % = Net income/Sales = $42,384/$392,640 * 100 = 10.79%

m. Return on assets % = Net income/Assets

= $42,384/$437,000 * 100 = 9.70%

n. Return on equity % = Net income/Equity

= $42,384/$278,000 * 100

= 15.25%

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