Problem:
The accounting staff of CCB Enterprises has completed the financial statements for the 2008 calendar year. The statement of income for the current year and the comparative statements of financial position for 2008 and 2007 follow.
CCB Enterprises
Statement of Income
For the Year Ended December 31, 2008
(Thousands omitted)
Revenue
Net sales $800,000
Other 60,000
Total Revenue 860,000
Expenses
Cost of goods sold $540,000
Research and development 25,000
Selling and administrative 155,000
Interest 20,000
Total expenses $740,000
Income before income taxes $120,000
Income taxes 48,000
Net income $72,000
CCB Enterprises
Comparative Statements of Financial Position
December 31, 2008 and 2007
(Thousands omitted)
2008 2007
Assets
Current assets:
Cash and short-term investments $26,000 $21,000
Receivables, less allowance for doubtful accounts
($1,100 in 2008 and $1,400 in 2007) 48,000 50,000
Inventories, at lower of FIFO cost or market 65,000 62,000
Prepaid items and other current assets 5,000 3,000
Total current assets $144,000 $136,000
Other assets:
Investments, at cost $106,000 $106,000
Deposits 10,000 8,000
Total other assets $116,000 $114,000
Property, plant, and equipment:
Land $12,000 $12,000
Buildings and equipment, less accumulated depreciation
($126,000 in 2008 and $122,000 in 2007) 268,000 248,000
Total property, plant, and equipment $280,000 $260,000
Total assets $540,000 $510,000
Liabilities and Owners' Equity
Current Liabilities:
Short-term loans $22,000 $24,000
Accounts payable 72,000 71,000
Salaries, wages, and other 26,000 27,000
Total current liabilities $120,000 122,000
Long-term debt 160,000 171,000
Total liabilities $280,000 $293,000
Owners' equity:
Common stock, at par $44,000 $42,000
Paid-in capital in excel of par 64,000 61,000
Total paid-in capital $108,000 $103,000
Retained earnings 152,000 114,000
Total owners' equity $260,000 $217,000
Total liabilities and owner's equity $540,000 $510,000
Required
Question 1. Calculate the following financial ratios for 2008 for CCB Enterprises:
a. Times interest earned
b. Return on total assets
c. Return on common stockholders'' equity
d. Debt-equity ratio (at December 31, 2008)
e. Current ratio (at December 31, 2008)
f. Quick (acid test) ratio (at December 31, 2008)
g. Accounts receivable turnover ratio (Assume that all sales are on credit.)
h. Number of days' sales in receivables
i. Inventory turnover ratio (Assume that all purchases are on credit.)
j. Number of days' sales in inventory
k. Number of days in cash operating cycle
Question 2. Prepare a few brief comments on the overall financial health of CCB Enterprises. For each comment, indicate any information that is not provided in the problem and that you would need to fully evaluate the company's financial health.