I apologize: this 1 question has numerous parts. I didn\'t want to split it up in to separate questions and confuse others. Selected year-end financial statements of Cabot Corporation follow. (All sales were on credit; selected balanoe sheet amounts at December 31, 2014, were inventory, S53,900; total assets, $199,400; common stock, 588,000; and retained earnings, 344,392.) CABOT CORPORATION Income Statement For Year Ended December 31, 2015 Sales Cost of goods sold S453,600 298,850 Gross profit Operating expenses Interest expense 158,750 98,800 4,600 Income before taxes Income taxes 53,350 21,492 Net income S 31,858 CABOT CORPORATION Balance Sheet December 31, 2015 Assets Cash Short-term investments Accounts receivable, net Notes receivable (trade) S 18,000 9,200 32,200 000 38,150 2,800 151,300 Liabilities and Equity Accounts payable Accrued Income taxes payable Long- term note payable, secured S 17,500 4,800 4,700 wages payable 5, Prepaid expenses Plant assets, net by mortgage on plant assets Common stod Retained earnings 83,400 88,000 76,250 Total assets S254,650 Total liabilities and equity S254,650 These are short-term notes receivable arising from customer (trade) sales. Required: Compute the following: (1) current ratio, (2) acid- test ratio, (3) days sales uncollected, (4) inventory turnover, (5) days\' sales in inventory, (8) debt-to-equity ratio, (7) times interest earned, (8) profit margin ratio, (9) total asset turnover, (10) return on total assets, and (11) return on common stockholders\' equity Do not round intermediate calculations.) Choose Numerator: | Choose Denominator: | = Current Ratio Current ratio 2015 to 1 Solution Answer to Part 1. Current Ratio = Current Assets / Current Liabilities Current Assets = Cash + Short Term Investments + Accounts Receivable, net + Notes Receivable (Trade) + Merchandise Inventory + Prepaid Expenses Current Assets = $16,000 + $9,200 + $32,200 + $5,000 + $38,150 + $2,800 Current Assets = $103,350 Current Liabilities = Accounts Payable + Accrued Wages Payable + Income Taxes Payable Current Liabilities = $17,500 + $4,800 + $4,700 Current Liabilities = $27,000 Current Ratio = 103,350 / 27,000 Current Ratio = 3.83 to 1 Answer to Part 2. Acid-Test Ratio = Quick Assets / Current Liabilities Quick Assets = Current Assets – Merchandise Inventory – Prepaid Expenses Quick Assets = $103,350 - $38,150 - $2,800 Quick Assets = $62,400 Acid-Test Ratio = 62,400 /27,000 Acid-Test Ratio = 2.31 to 1 Answer to Part 3. Days Collected Sales = Current Receivable / Net Sales * 365 Current Receivable = $32,200 + $5,000 = $37,200 Days Collected Sales = 37,200 / 453,600 * 100 Days Collected Sales = 29.93 days Answer to Part 4. Inventory Turnover Ratio = Cost of goods sold / Average Inventory Average Inventory = (38,150 + 53,900) / 2 Average Inventory = $46,025 Inventory Turnover Ratio = 296,850 / 46,025 Inventory Turnover Ratio = 6.45 times Answer to Part 5. Days’ Sales in Inventory = Average Inventory / Cost of Goods Sol.

1. I apologize: this 1 question has numerous parts. I didn't want to split it up in to separate
questions and confuse others. Selected year-end financial statements of Cabot Corporation
follow. (All sales were on credit; selected balanoe sheet amounts at December 31, 2014, were
inventory, S53,900; total assets, $199,400; common stock, 588,000; and retained earnings,
344,392.) CABOT CORPORATION Income Statement For Year Ended December 31, 2015
Sales Cost of goods sold S453,600 298,850 Gross profit Operating expenses Interest expense
158,750 98,800 4,600 Income before taxes Income taxes 53,350 21,492 Net income S 31,858
CABOT CORPORATION Balance Sheet December 31, 2015 Assets Cash Short-term
investments Accounts receivable, net Notes receivable (trade) S 18,000 9,200 32,200 000 38,150
2,800 151,300 Liabilities and Equity Accounts payable Accrued Income taxes payable Long-
term note payable, secured S 17,500 4,800 4,700 wages payable 5, Prepaid expenses Plant assets,
net by mortgage on plant assets Common stod Retained earnings 83,400 88,000 76,250 Total
assets S254,650 Total liabilities and equity S254,650 These are short-term notes receivable
arising from customer (trade) sales. Required: Compute the following: (1) current ratio, (2) acid-
test ratio, (3) days sales uncollected, (4) inventory turnover, (5) days' sales in inventory, (8)
debt-to-equity ratio, (7) times interest earned, (8) profit margin ratio, (9) total asset turnover, (10)
return on total assets, and (11) return on common stockholders' equity Do not round
intermediate calculations.) Choose Numerator: | Choose Denominator: | = Current Ratio Current
ratio 2015 to 1
Solution
Answer to Part 1.
Current Ratio = Current Assets / Current Liabilities
Current Assets = Cash + Short Term Investments + Accounts Receivable, net + Notes
Receivable (Trade) + Merchandise Inventory + Prepaid Expenses
Current Assets = $16,000 + $9,200 + $32,200 + $5,000 + $38,150 + $2,800
Current Assets = $103,350
Current Liabilities = Accounts Payable + Accrued Wages Payable + Income Taxes Payable
Current Liabilities = $17,500 + $4,800 + $4,700
Current Liabilities = $27,000
Current Ratio = 103,350 / 27,000
Current Ratio = 3.83 to 1
Answer to Part 2.
Acid-Test Ratio = Quick Assets / Current Liabilities

2. Quick Assets = Current Assets – Merchandise Inventory – Prepaid Expenses
Quick Assets = $103,350 - $38,150 - $2,800
Quick Assets = $62,400
Acid-Test Ratio = 62,400 /27,000
Acid-Test Ratio = 2.31 to 1
Answer to Part 3.
Days Collected Sales = Current Receivable / Net Sales * 365
Current Receivable = $32,200 + $5,000 = $37,200
Days Collected Sales = 37,200 / 453,600 * 100
Days Collected Sales = 29.93 days
Answer to Part 4.
Inventory Turnover Ratio = Cost of goods sold / Average Inventory
Average Inventory = (38,150 + 53,900) / 2
Average Inventory = $46,025
Inventory Turnover Ratio = 296,850 / 46,025
Inventory Turnover Ratio = 6.45 times
Answer to Part 5.
Days’ Sales in Inventory = Average Inventory / Cost of Goods Sold * 365
Days’ Sales in Inventory = 46,025 / 296,850 * 365
Days’ Sales in Inventory = 56.59 days