Ross et al.: Fundamentals
of Corporate Finance, Sixth
Edition, Alternate Edition
II. Financial Statements
and Long−Term Financial
Planning
- Working with Financial
Statements
© The McGraw−Hill^123
Companies, 2002
- Calculating Financial Ratios Find the following financial ratios for Smolira
Golf Corp. (use year-end figures rather than average values where appropriate):
Short-term solvency ratios
a.Current ratio
b.Quick ratio
c. Cash ratio
Asset utilization ratios
d.Total asset turnover
e. Inventory turnover
f. Receivables turnover
Long-term solvency ratios
g.Total debt ratio
h.Debt-equity ratio
i. Equity multiplier
j. Times interest earned ratio
k.Cash coverage ratio
CHAPTER 3 Working with Financial Statements 91
SMOLIRA GOLF CORP.
Balance Sheets as of December 31, 2001 and 2002
2001 2002 2001 2002
Assets Liabilities and Owners’ Equity
Current assets
Cash $ 650 $ 710
Accounts receivable 2,382 2,106
Inventory 4,408 4,982
Total $ 7,440 $ 7,798
Fixed assets
Net plant and equipment $13,992 $18,584
Total assets $21,432 $26,382
Current liabilities
Accounts payable $ 987 $ 1,215
Notes payable 640 718
Other 90 230
Total $ 1,717 $ 2,163
Long-term debt $ 4,318 $ 4,190
Owners’ equity
Common stock and paid-in
surplus $10,000 $10,000
Retained earnings 5,397 10,029
Total $15,397 $20,029
Total $21,432 $26,382
SMOLIRA GOLF CORP.
2002 Income Statement
Sales $28,000
Cost of goods sold 11,600
Depreciation 2,140
Earnings before interest and taxes $14,260
Interest paid 980
Taxable income $13,280
Taxes (35%) 4,648
Net income $ 8,632
Dividends $4,000
Addition to retained earnings 4,632
Some recent financial statements for Smolira Golf Corp. follow. Use this in-
formation to work Problems 26 through 30.
Intermediate
(continued)
