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Here are simplified financial statements of Phone Corporation from a recent year:
please solve it and show little of explaining. thank you 5. Here are simplified financial
statements for Phone Corporation in a recent year: INCOME STATEMENT (Figures in S
millions) Net sales Cost of goods sold Other expenses Depreciation $ 13,193 4,060 4,049 2,518
Earnings before interest and taxes (EBIT) Interest expense $ 2,566 685 Income before tax Taxes
(at 35%) $1,881 658 $1,223 $ 856 Net income Dividends
Solution
a) Return on equity = Net Income/ shareholders equity Net income = 1223 - 856 =
367 Average shareholders equity = ( 9724 + 9121) / 2 = 9422.50
ROE = 367 / 9422.50 = 0.04 b) Return on assets = Net Income /
Average total Assets Net Income = 1223 Average Assets = ( 27714 + 27503)/2 =
27608.50 ROA = 1223/27608.5 = 0.04 c)Return on capital =
earning before interest and tax / Total assets - current liabilities EBIT = 2566
Total Assets - current liabilities = 27714 - 4794 = 22920 Return on capital
= 2566/22920 = 0.11 d) Days in inventory = 365/ Inventory turnover
Inventory turnover = cost of goods sold / inventory = 4060 / 238
= 17.06 Days in inventory = 365/17.06 = 21.40 e)
Inventory turnover = cost of goods sold / inventory = 4060 / 238
= 17.06 f) Average collection period = 365 / receivable turnover
Reveivable turnover = sales revenue / average receivables Sales revenue = 13193
beginning receivables = 2490 Receivable turnover = 13193/2490 = 5.3
g) operating profit margin = operating income / net sales operating income = 1223
net sales = 13193 operating profit margin = 1223/13193 = 0.09 h) long term debt
ratio = long term debt /total assets long term debt 4794 Total assets 27714
long term debt = 4794 / 27714 = 0.17 i) Total debt ratio = total
liabilities / total assets Total liabilities = Total liabilities - shareholders equity
= 27714 - 9724 = 17990 Total assets = 27714 Total debt
ratio = 17990 / 27714 = 0.65 j) Times interest earned = Earning before interst and tax /
interest expense EBIT 2566 Interest expense 685 Times interest earned
= 2566/685 = 3.75 k) Cash coverage ratio = (EBIT + Non cash expenses)/interest
expense EBIT 2566 Interest expense 685 Non cash expense ( depriciation)
2518 Cash coverage ratio = ( 2566 + 2518) / 685 = 7.42
l) Current ratio = Current Assets / Cyrrent liabilities Current assets 3525
Current liabilities 4794 Current ratio = 3525/4794 = 0.74 m) Quick ratio =
( Current assets - inventory)/ current liabilities Current assets 3525 Current
liabilities 4794 inventory 187 Quick ratio = ( 3525-187)/4794
= 0.70

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Here are simplified financial statements of Phone Corporation from a.pdf

  • 1. Here are simplified financial statements of Phone Corporation from a recent year: please solve it and show little of explaining. thank you 5. Here are simplified financial statements for Phone Corporation in a recent year: INCOME STATEMENT (Figures in S millions) Net sales Cost of goods sold Other expenses Depreciation $ 13,193 4,060 4,049 2,518 Earnings before interest and taxes (EBIT) Interest expense $ 2,566 685 Income before tax Taxes (at 35%) $1,881 658 $1,223 $ 856 Net income Dividends Solution a) Return on equity = Net Income/ shareholders equity Net income = 1223 - 856 = 367 Average shareholders equity = ( 9724 + 9121) / 2 = 9422.50 ROE = 367 / 9422.50 = 0.04 b) Return on assets = Net Income / Average total Assets Net Income = 1223 Average Assets = ( 27714 + 27503)/2 = 27608.50 ROA = 1223/27608.5 = 0.04 c)Return on capital = earning before interest and tax / Total assets - current liabilities EBIT = 2566 Total Assets - current liabilities = 27714 - 4794 = 22920 Return on capital = 2566/22920 = 0.11 d) Days in inventory = 365/ Inventory turnover Inventory turnover = cost of goods sold / inventory = 4060 / 238 = 17.06 Days in inventory = 365/17.06 = 21.40 e) Inventory turnover = cost of goods sold / inventory = 4060 / 238 = 17.06 f) Average collection period = 365 / receivable turnover Reveivable turnover = sales revenue / average receivables Sales revenue = 13193 beginning receivables = 2490 Receivable turnover = 13193/2490 = 5.3 g) operating profit margin = operating income / net sales operating income = 1223 net sales = 13193 operating profit margin = 1223/13193 = 0.09 h) long term debt ratio = long term debt /total assets long term debt 4794 Total assets 27714 long term debt = 4794 / 27714 = 0.17 i) Total debt ratio = total liabilities / total assets Total liabilities = Total liabilities - shareholders equity = 27714 - 9724 = 17990 Total assets = 27714 Total debt ratio = 17990 / 27714 = 0.65 j) Times interest earned = Earning before interst and tax / interest expense EBIT 2566 Interest expense 685 Times interest earned = 2566/685 = 3.75 k) Cash coverage ratio = (EBIT + Non cash expenses)/interest expense EBIT 2566 Interest expense 685 Non cash expense ( depriciation) 2518 Cash coverage ratio = ( 2566 + 2518) / 685 = 7.42 l) Current ratio = Current Assets / Cyrrent liabilities Current assets 3525 Current liabilities 4794 Current ratio = 3525/4794 = 0.74 m) Quick ratio =
  • 2. ( Current assets - inventory)/ current liabilities Current assets 3525 Current liabilities 4794 inventory 187 Quick ratio = ( 3525-187)/4794 = 0.70