Using the financial statements for the Snider Corporation, calculate the 13 basic ratios found in the chapter.

SNIDER CORPORATION
Balance sheet
December 31, 20X1
Assets
Current assets:
Cash	\(52,200
Marketable securities	24,400
Accounts receivable (net)	222,000
Inventory	238,000
Total current assets	\)536,600
Investments	65,900
Plant and equipment	\(615,000
Less: accumulated depreciation	(271,000)
Net plant and equipment	\)344,000
Total assets	\(946,500
Liabilities and stockholder’s equity
Current liabilities:
Account payables	\)93,400
Notes payable	70,600
Accrued taxes	17,000
Total current liabilities	\(181,000
Long term liabilities:
Bonds payable	\)153,200
Total liabilities	\(334,200
Stockholder’s equity
Preferred stock, \)50 per value	\(100,000
Common stock, \)1 par value	80,000
Capital paid in excess of par	190,000
Retained earnings	242,300
Total stockholder’s equity	\(612,300
Total liabilities and stockholder’s equity	\)946,500

SNIDER CORPORATION
Income statement
For the year ending December 31, 20X1
Sales (on credit)	\(2,064,000
Less: cost of goods sold	1,313,000
Gross profit	\)751,000
Less: selling and administrative expenses	496,000*
Operating profit (EBIT)	\(255,000
Less: interest expenses	26,900
Earning before tax (EBT)	\)228,100
Less: taxes	83,300
Earning after taxes (EAT)	\(144,800

*includes \)36,100 in lease payments

Step by step solution

01

Current ratio

$\begin{array}{rcl}\mathrm{Current}\mathrm{ratio}& =& \frac{\mathrm{Current}\mathrm{assets}}{\mathrm{Current}\mathrm{liabilities}}\\ & =& \frac{\$536,600}{\$181,000}\\ & =& 2.96\end{array}$

02

Quick ratio

$\begin{array}{rcl}\mathrm{Quick}\mathrm{ratio}& =& \frac{\mathrm{Current}\mathrm{assets}-\mathrm{Inventories}}{\mathrm{Current}\mathrm{liabilities}}\\ & =& \frac{\$536,600-\$238,000}{\$181,000}\\ & =& 1.65\end{array}$

03

Profit margin

$\begin{array}{rcl}\mathrm{Profit}& =& \frac{\mathrm{Net}\mathrm{income}}{\mathrm{Sales}}\\ & =& \frac{\$144,800}{\$2,064,000}\\ & =& 7.02\%\end{array}$

04

Return on assets

$\begin{array}{rcl}\mathrm{Return}\mathrm{on}\mathrm{assets}& =& \frac{\mathrm{Net}\mathrm{income}}{\mathrm{Total}\mathrm{assets}}\\ & =& \frac{\$144,800}{\$946,500}\\ & =& 15.30\%\end{array}$

05

Return on equity

$\begin{array}{rcl}\mathrm{Return}\mathrm{on}\mathrm{equity}& =& \frac{\mathrm{Net}\mathrm{income}}{\mathrm{Stockholder}\text{'}\mathrm{s}\mathrm{equity}}\\ & =& \frac{\$144,800}{\$612,300}\\ & =& 23.65\%\end{array}$

06

Receivable turnover ratio

$\begin{array}{rcl}\mathrm{Receivable}\mathrm{turnover}\mathrm{ratio}& =& \frac{\mathrm{Sales}}{\mathrm{Average}\mathrm{accounts}\mathrm{receivable}}\\ & =& \frac{\$2,064,000}{\$222,000}\\ & =& 9.30\end{array}$

07

Inventory turnover

$\begin{array}{rcl}\mathrm{Inventory}\mathrm{turnover}& =& \frac{\mathrm{Sales}}{\mathrm{Average}\mathrm{inentory}}\\ & =& \frac{\$2,064,000}{\$238,000}\\ & =& 8.67\end{array}$

08

Fixed assets turnover ratio

$\begin{array}{rcl}\mathrm{Fixed}\mathrm{asset}\mathrm{turnover}\mathrm{ratio}& =& \frac{\mathrm{Sales}}{\mathrm{Fixed}\mathrm{assets}}\\ & =& \frac{\$2,064,000}{\$344,000}\\ & =& 6\end{array}$

09

Total assets turnover ratio

$\begin{array}{rcl}\mathrm{Total}\mathrm{asset}\mathrm{turnover}\mathrm{ratio}& =& \frac{\mathrm{Sales}}{\mathrm{Total}\mathrm{assets}}\\ & =& \frac{\$2,064,000}{\$946,500}\\ & =& 2.18\end{array}$

10

Debt to assets ratio

$\begin{array}{rcl}\mathrm{Debt}\mathrm{to}\mathrm{assets}\mathrm{ratio}& =& \frac{\mathrm{Total}\mathrm{debts}}{\mathrm{Total}\mathrm{assets}}\\ & =& \frac{\$153,200}{\$946,500}\\ & =& 16.19\%\end{array}$

11

Interest coverage ratio

$\begin{array}{rcl}\mathrm{Interest}\mathrm{coverage}\mathrm{ratio}& =& \frac{\mathrm{EBIT}}{\mathrm{Interest}\mathrm{expense}}\\ & =& \frac{\$255,000}{\$26,900}\\ & =& 9.48\end{array}$

12

Fixed charges coverage ratio

$\begin{array}{rcl}\mathrm{Fixed}\mathrm{charges}\mathrm{coverage}\mathrm{ratio}& =& \frac{\mathrm{EBIT}+\mathrm{Fixed}\mathrm{charges}\mathrm{before}\mathrm{taxes}}{\mathrm{Interest}\mathrm{expense}+\mathrm{Fixed}\mathrm{charges}\mathrm{before}\mathrm{taxes}}\\ & =& \frac{\$255,000+\$36,100}{\$26,900+\$36,100}\\ & =& 4.62\end{array}$

13

Debt to equity ratio

$\begin{array}{rcl}\mathrm{Debt}\mathrm{to}\mathrm{equity}\mathrm{ratio}& =& \frac{\mathrm{Debt}}{\mathrm{Equity}}\\ & =& \frac{\$153,200}{\$612,300}\\ & =& 25.02\%\end{array}$

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