Here are simplified financial statements for Phone Corporation in 2020: INCOME STATEMENT (Figures in $ millions) Net sales $ 12,300 Cost of goods sold 3,610 Other expenses 4,022 Depreciation 2,248 Earnings before interest and taxes (EBIT) $ 2,420 Interest expense 640 Income before tax $ 1,780 Taxes (at 21%) 374 Net income $ 1,406 Dividends $ 756 BALANCE SHEET (Figures in $ millions) End of Year Start of Year Assets Cash and marketable securities $ 80 $ 149 Receivables 1,932 2,310 Inventories 142 193 Other current assets 822 887 Total current assets $ 2,976 $ 3,539 Net property, plant, and equipment 19,883 19,825 Other long-term assets 4,126 3,680 Total assets $ 26,985 $ 27,044 Liabilities and shareholders’ equity Payables $ 2,474 $ 2,950 Short-term debt 1,374 1,528 Other current liabilities 766 742 Total current liabilities $ 4,614 $ 5,220 Long-term debt and leases 9,259 8,444 Other long-term liabilities 6,088 6,059 Shareholders’ equity 7,024 7,321 Total liabilities and shareholders’ equity $ 26,985 $ 27,044 Calculate the following financial ratios for Phone Corporation: Note: Use 365 days in a year. Do not round intermediate calculations. Round your final answers to 2 decimal places. a. Return on equity (Use average balance sheet figure)..................... b. Return on Assets (Use average balance sheet figure).................... c. Return on Capital (Use average balance sheet figure)....................

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Question

Here are simplified financial statements for Phone Corporation in 2020:

INCOME STATEMENT
(Figures in $ millions)
Net sales	$ 12,300
Cost of goods sold	3,610
Other expenses	4,022
Depreciation	2,248
Earnings before interest and taxes (EBIT)	$ 2,420
Interest expense	640
Income before tax	$ 1,780
Taxes (at 21%)	374
Net income	$ 1,406
Dividends	$ 756

BALANCE SHEET
(Figures in $ millions)
	End of Year	Start of Year
Assets
Cash and marketable securities	$ 80	$ 149
Receivables	1,932	2,310
Inventories	142	193
Other current assets	822	887
Total current assets	$ 2,976	$ 3,539
Net property, plant, and equipment	19,883	19,825
Other long-term assets	4,126	3,680
Total assets	$ 26,985	$ 27,044
Liabilities and shareholders’ equity
Payables	$ 2,474	$ 2,950
Short-term debt	1,374	1,528
Other current liabilities	766	742
Total current liabilities	$ 4,614	$ 5,220
Long-term debt and leases	9,259	8,444
Other long-term liabilities	6,088	6,059
Shareholders’ equity	7,024	7,321
Total liabilities and shareholders’ equity	$ 26,985	$ 27,044

Calculate the following financial ratios for Phone Corporation:

Note: Use 365 days in a year. Do not round intermediate calculations. Round your final answers to 2 decimal places.

a. Return on equity (Use average balance sheet figure).....................

b. Return on Assets (Use average balance sheet figure)....................

c. Return on Capital (Use average balance sheet figure)....................

d. Days in Inventory (Use start-of-year balance sheet figure).............

e. Inventory turnover (Use start-of-year balance sheet figure).............

f. Average collection period (Use start-of-year balance sheet figure).............

g. Operating profit nargin.................

h. Longterm debt ratio (Use end-of-year balance sheet figure).............

i. Total debt ratio (Use end-of-year balance sheet figure).............

j. Times interest earned...................

k. Cash coverage ratio.....................

i. Current ratio (Use end-of-year balance sheet figure).............

m. Quick ratio (Use end-of-year balance sheet figure).............

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

Expert Solution

Trending now

This is a popular solution!

Step by step

Solved in 3 steps with 2 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.