Chapter 2: 17BP_b (page 80)

Assume the following data for Cable Corporation and Multi-Media Inc.
Capable corporation
Muli-media inc
Net income
$31,200
$140,000
Sales
317,000
2,700,000
Total assets
402,000
965,000
Total debts
163,000
542,000
Stockholder’s equity
239,000
423,000
b. Compute the following additional ratios for both firms:
Net income/Sales
Net income/Total assets
Sales/Total assets
Debt/Total assets

Short Answer

Expert verified

	Capable corporation	Multi medi Inc.
Net income/sales	9.84%	5.19%
Net income/Total assets	7.76%	14.51%
Sales/Total assets	78.86%	279.79%
Debt/Total assets	40.55%	56.17%

Step by step solution

Net income/sales ratio of capable corporation

$\begin{array}{rcl} Net income / Sales & = & \frac{Net income}{Sales} \\ = & \frac{$ 31, 200}{$ 317, 000} \\ = & 9.84 % \end{array}$

Net income/sales ratio of Multimedia inc.

$\begin{array}{rcl} Net income / Sales & = & \frac{Net income}{Sales} \\ = & \frac{$ 140, 000}{$ 2, 700, 000} \\ = & 5.19 % \end{array}$

Net income/Total assets ratio of capable corporation

$\begin{array}{rcl} Net income / Total assets & = & \frac{Net income}{Total assets} \\ = & \frac{$ 31, 200}{$ 402, 000} \\ = & 7.76 % \end{array}$

Net income/Total assets ratio of Multimedia inc.

$\begin{array}{rcl} Net income / Total assets & = & \frac{Net income}{Total assets} \\ = & \frac{$ 140, 000}{$ 965, 000} \\ = & 14.51 % \end{array}$

Sales/Total assets ratio of capable corporation

$\begin{array}{rcl} Sales / Total assets & = & \frac{Sales}{Total assets} \\ = & \frac{$ 317, 000}{$ 402, 000} \\ = & 78.86 % \end{array}$

Sales/Total assets ratio of Multimedia inc.

$\begin{array}{rcl} Sales / Total assets & = & \frac{Sales}{Total assets} \\ = & \frac{$ 2, 700, 000}{$ 965, 000} \\ = & 279.79 % \end{array}$

Debt/Total assets ratio of capable corporation

$\begin{array}{rcl} Debts / Total assets & = & \frac{Debt}{Total assets} \\ = & \frac{$ 163, 000}{$ 402, 000} \\ = & 40.55 % \end{array}$

Debts/Total assets ratio of Multimedia inc.

$\begin{array}{rcl} Debt / Total assets & = & \frac{Debt}{Total assets} \\ = & \frac{$ 542, 000}{$ 965, 000} \\ = & 56.17 % \end{array}$

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Stud Clothier
Balance sheet 20X1
Assets		Liabilities and Equity
Cash	\)60,000	Account payable	\(220,000
Account receivable	240,000	Accrued taxes	30,000
Inventory	350,000	Bonds payable (long term)	150,000
Plant and equipment	410,000	Common stock	80,000
		Paid in capital	200,000
		Retained earnings	380,000
Total assets	\)1,060,000	Total LIbilities and Equity	$1,060,000

Short Answer

Step by step solution

Net income/sales ratio of capable corporation

Net income/sales ratio of Multimedia inc.

Net income/Total assets ratio of capable corporation

Net income/Total assets ratio of Multimedia inc.

Sales/Total assets ratio of capable corporation

Sales/Total assets ratio of Multimedia inc.

Debt/Total assets ratio of capable corporation

Debts/Total assets ratio of Multimedia inc.

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	Capable corporation	Muli-media inc
Net income	\(31,200	\)140,000
Sales	317,000	2,700,000
Total assets	402,000	965,000
Total debts	163,000	542,000
Stockholder’s equity	239,000	423,000