Question

ES Problem 13-2A The comparative statements of Cullumber Company are presented here. CULLUMBER COMPANY Income Statements For the Years Ended December 31 2017 2016 Net sales $1,891,640 $1,751,600 1,007,100 744,500 480,100 330,900 264,400 Cost of goods sold 1,059,640 yGross profit 832,000 501,100460 Selling and administrative expenses Income from operations Other expenses and losses Interest expense Income before income taxes Income tax expense Net income 23,700 307,200 93,700 s 213,500 21,700 242,700 74,700 $168,00o CULLUMBER COMPANY Balance Sheets Assets 2017 2016 Current assets Cash Debt investments (short-term) Accounts receivable InventonyY s 60,100 64,200 74,000 50,000 118,900 103,900 127,700 117,200 380,700 335,300 661,000 532,300 $1,041,700 $867,600 Total current assets Plant assets (net) Total assets Liabilities and Stockholders' Equity Current liabilities Accounts payable 161,100 $146,500 FI

Answer 1

a. Earning per share: 2017 213500 2016 Net Income Less: Preferred dividend Net Income for common stockholders 168000 213500 168000 Common stock ( $5 par) Number of common stock outstanding ( common stock amount/ par value per stock) Earning per share 290000 300000 58000 60000 3.68 2.80 (Net income for common stockholders /Number of common stock outstanding) (213,500/58,000) (168,000/60,000) b. Return on common stockholder' equity Net Income for common stockholders 2016 2017 213500 Total common stockholder's equity Average common stockholder's equity I (Ending Beginning) /2] 603400 465400 534400 Return on common stockholders' equity (Net income for common stockholders / Average common stockholders' equity) 39.95% (213,500 /534,400

Return on assets: Total assets Average total assets I (Ending Beginning) /2] 2017 1041700 954650 C. 2016 867600 (1,041,700+867,600)/2 Net Income 213500 Return on assets 22.36% (Net income/ Average total assets) (213,500/954,650) Note: Some investor calculate return on assets by taking (Net income +interest expenses) instead of net income. You can use this also Net Income +Interest Expenses (213,500/ 23,700) Return on assets [(Net Income+ interest expenses)/average total assets] 237200 24.85% d. Current ratio: Total current assets Total current liabilities 2017 380700 206300 2016 335300 190200 Current ratio 1.85 1.76 :1 (Current assets/current liabilities) (380,700/ 206,300) (335,300 190,200)

Accounts receivable turnover: Net Sales Account receivables Average accounts receivable I (Ending Beginning) /2] 2017 1891640 118900 111400 2016 1751600 103900 e. Accounts receivable turnover 16.98 times (Net sales / Average Account receivables) (1,891,640/111,400) f. Average collection period 2017 1891640 111400 2016 Net Sales Average accounts receivable Average collection period (Average Account receivables/net sales)*365 OR Average collection period (365/ Accounts receivable turnover 21.50 days (111,400/1,891,640)*365 21.50 days (365/16.98) g. Inventory turnover: 2017 127700 122450 (127,700+ 117,200)/2 2016 117200 Inventory Average inventory I (Ending Beginning) /2]

Cost of goods sold 1059640 1007100 8.65 times Inventory Turnover (Cost of goods sold /average inventory) (1,059,640/122,450) h. Days in inventory: Cost of goods sold Average invento 2017 1059640 122450 2016 42.18 days Days in inventory (Average inventory/cost of goods sold) *365 OR Average collection period (365 / Accounts inventory) (122,450/1,059,640) *365 42.18 days (365/8.65 Times Interest earned: Income before Interest and taxes Interest expenses i. 2017 330900 23700 2016 264400 21700 Times Interest earned 13.96 12.18 times (Income before Interest and taxes/ Interest expenses) (330,900 28,700)

2017 954650 1891640 2016 Asset Turnover: Average total assets Net sale:s Asset Turnover 1.98 times (Net sales/ asset turnover) (1,891,640/954,650) k. Debt to asset ratio: Total liabilities / Total Debt Total Assets 2017 438300 1041700 2016 402200 867600 Debt to asset ratio 42.08% 46.36% (Total Debt/total asset (438,300/1,041,700) l. Free cash flow: Net cash provided by operating activities Capital Expenditure Free cash flow 2017 227000 136000 91,000