Sandhill Co. has these comparative balance sheet data:
| SANDHILL CO.
|Cash||$ 33,450||$ 66,900|
|Accounts receivable (net)||156,100||133,800|
|Plant assets (net)||446,000||401,400|
|Accounts payable||$ 111,500||$ 133,800|
|Mortgage payable (15%)||223,000||223,000|
|Common stock, $10 par||312,200||267,600|
Additional information for 2017:
|1.||Net income was $34,100.|
|2.||Sales on account were $377,100. Sales returns and allowances amounted to $27,600.|
|3.||Cost of goods sold was $200,200.|
|4.||Net cash provided by operating activities was $56,000.|
|5.||Capital expenditures were $28,200, and cash dividends were $19,300.|
Compute the following ratios at December 31, 2017. (Round current ratio and inventory turnover to 2 decimal places, e.g. 1.83 and all other answers to 1 decimal place, e.g. 1.8. Use 365 days for calculation.)
|(a)||Current ratio.||enter current ratio rounded to 2 decimal places :||1|
|(b)||Accounts receivable turnover.||enter accounts receivable turnover in times rounded to 1 decimal place||times|
|(c)||Average collection period.||enter average collection period in days rounded to 1 decimal place||days|
|(d)||Inventory turnover.||enter inventory turnover in times rounded to 2 decimal places||times|
|(e)||Days in inventory.||enter days in inventory rounded to 1 decimal place||days|
|(f)||Free cash flow.||enter free cash flow in dollars rounded to 1 decimal place||$|
Financial ratios are used by investors to measure the financial health of a company and thereby evaluate its attractiveness as an investment opportunity. There are various categories of ratios including (1) liquidity, (2) activity, (3) solvency, (4) profitability, and (5) market. These ratios may be compared over time in a trend analysis or to other companies in an industry analysis.
Answer and Explanation: 1
|(a) Current ratio.||Current Assets / Current Liabilities||($33,450 + $156,100 + 133,800) / $111,500||2.90 : 1|
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fromChapter 8 / Lesson 5
Explore the types of analysis of financial ratios. Learn the definition of a financial ratio and find the calculation and interpretation of a financial ratio.