CHAPTER 3-9 - Profit margin = $36,475 / $305,830 = 0.1193...

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Total asset turnover = $305,830 / $321,075 = 0.95 times Inventory turnover = Cost of goods sold / Inventory Inventory turnover = $210,935 / $24,650 = 8.56 times Receivables turnover = Sales / Accounts receivable Receivables turnover = $305,830 / $13,850 = 22.08 times Long-term solvency ratios: Total debt ratio = (Total assets – Total equity) / Total assets Total debt ratio 2008 = ($290,328 – 176,365) / $290,328 = 0.39 Total debt ratio 2009 = ($321,075 – 192,840) / $321,075 = 0.40 Debt-equity ratio = Total debt / Total equity Debt-equity ratio 2008 = ($38,963 + 75,000) / $176,365 = 0.65 Debt-equity ratio 2009 = ($43,235 + 85,000) / $192,840 = 0.66 Equity multiplier = 1 + D/E Equity multiplier 2008 = 1 + 0.65 = 1.65 Equity multiplier 2009 = 1 + 0.66 = 1.66 Times interest earned = EBIT / Interest Times interest earned = $68,045 / $11,930 = 5.70 times Cash coverage ratio = (EBIT + Depreciation) / Interest Cash coverage ratio = ($68,045 + 26,850) / $11,930 = 7.95 times Profitability ratios: Profit margin = Net income / Sales
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Unformatted text preview: Profit margin = $36,475 / $305,830 = 0.1193 or 11.93% Return on assets = Net income / Total assets Return on assets = $36,475 / $321,075 = 0.1136 or 11.36% Return on equity = Net income / Total equity Return on equity = $36,475 / $192,840 = 0.1891 or 18.91% 27. The DuPont identity is: ROE = (PM)(TAT)(EM) ROE = (0.1193)(0.95)(1.66) = 0.1891 or 18.91% 28. SMOLIRA GOLF CORP. Statement of Cash Flows For 2009 Cash, beginning of the year $ 21,860 Operating activities Net income $ 36,475 Plus: Depreciation $ 26,850 Increase in accounts payable 3,530 Increase in other current liabilities 1,742 Less: Increase in accounts receivable $ (2,534) Increase in inventory (1,566) Net cash from operating activities $ 64,497 Investment activities Fixed asset acquisition $(53,307) Net cash from investment activities $(53,307) Financing activities Increase in notes payable $ (1,000) Dividends paid (20,000) Increase in long-term debt 10,000 Net cash from financing activities $(11,000)...
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CHAPTER 3-9 - Profit margin = $36,475 / $305,830 = 0.1193...

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