Some recent financial statements for Smolira Golf Corp. follow.

Some recent financial statements for Smolira Golf Corp. follow.

 

SMOLIRA GOLF 2011 and 2012 Balance Sheets
Assets									Liabilities and Owners’ Equity
	2011				2012					2011				2012
Current assets									Current liabilities
Cash	$	23,046			$	25,100			Accounts payable	$	24,184			$	28,100
Accounts receivable		13,448				16,200			Notes payable		20,000				11,800
Inventory		26,822				28,100			Other		12,571				19,100
Total	$	63,316			$	69,400			Total	$	56,755			$	59,000
									Long-term debt	$	79,000			$	90,000
									Owners’ equity
									Common stock and paid-in surplus	$	48,000			$	48,000
									Accumulated retained earnings		214,256				237,000
Fixed assets
Net plant and equipment	$	334,695			$	364,600			Total	$	262,256			$	285,000
Total assets	$	398,011			$	434,000			Total liabilities and owners’ equity	$	398,011			$	434,000

SMOLIRA GOLF, INC. 2012 Income Statement
Sales					$	349,760
Cost of goods sold						241,500
Depreciation						27,200
Earnings before interest and taxes					$	81,060
Interest paid						15,300
Taxable income					$	65,760
Taxes (35%)						23,016
Net income					$	42,744
Dividends	$	20,000
Retained earnings		22,744

  

Find the following financial ratios for Smolira Golf Corp. (use year-end figures rather than average values where appropriate): (Round your answers to 2 decimal places. (e.g., 32.16))

 

Short-term solvency ratios:		2011	2012
a.	Current ratio	times	times
b.	Quick ratio	times	times

 

Asset utilization ratios:
c.	Total asset turnover	times

 

Long-term solvency ratios:		2011	2012
d.	Total debt ratio	times	times

 

e.	Times interest earned	times

 

Profitability ratios:
f.	Profit margin	%
g.	Return on equity	%

Explanation:

a.

Short-term solvency ratios:
Current ratio	=	Current assets / Current liabilities
Current ratio 2011	=	$63,316 / $56,755 = 1.12 times
Current ratio 2012	=	$69,400 / $59,000 = 1.18 times

 
b.

Quick ratio	=	(Current assets − Inventory) / Current liabilities
Quick ratio 2011	=	($63,316 − 26,822) / $56,755 = 0.64 times
Quick ratio 2012	=	($69,400 − 28,100) / $59,000 = 0.70 times

 
c.

Asset utilization ratios:
Total asset turnover	=	Sales / Total assets
Total asset turnover	=	$349,760 / $434,000 = 0.81 times

   
d.

Long-term solvency ratios:
Total debt ratio	=	(Total assets − Total equity) / Total assets
Total debt ratio 2011	=	($398,011 − 262,256) / $398,011 = 0.34 times
Total debt ratio 2012	=	($434,000 − 285,000) / $434,000 = 0.34 times

   
e.

Times interest earned	=	EBIT / Interest
Times interest earned	=	$81,060 / $15,300 = 5.30 times

 
f.

Profitability ratios:
Profit margin	=	Net income / Sales
Profit margin	=	$42,744 / $349,760 = 0.1222, or 12.22%

   
g.

Return on equity	=	Net income / Total equity
Return on equity	=	$42,744 / $285,000 = 0.1500, or 15.00%