Question

Basic Financial Ratios

The accounting staff of CCB Enterprises has completed the financial statements for the 2016 calendar year. The statement of income for the current year and the comparative statements of financial position for 2016 and 2015 follow.

CCB Enterprises
Statement of Income
For the Year Ended December 31, 2016
(thousands omitted)
Revenue:
Net sales	$794,620
Other	58,420
Total revenue	$853,040
Expenses:
Cost of goods sold	$530,320
Research and development	24,480
Selling and administrative	155,320
Interest	19,600
Total expenses	$729,720
Income before income taxes	$123,320
Income taxes	49,328
Net income	$73,992

CCB Enterprises
Comparative Statements of Financial Position
December 31, 2016 and 2015
(thousands omitted)
	2016	2015
Assets
Current assets:
Cash and short-term investments	$25,910	$20,860
Receivables, less allowance for doubtful accounts
($1,130 in 2016 and $1,410 in 2015)	48,190	50,300
Inventories, at lower of FIFO cost or market	64,860	62,100
Prepaid items and other current assets	5,220	3,280
Total current assets	$144,180	$136,540
Other assets:
Investments, at cost	$105,880	$105,880
Deposits	10,160	7,980
Total other assets	$116,040	$113,860
Property, plant, and equipment:
Land	$12,100	$12,100
Buildings and equipment, less accumulated depreciation
($126,330 in 2016 and $122,240 in 2015)	268,840	247,870
Total property, plant, and equipment	$280,940	$259,970
Total assets	$541,160	$510,370
Liabilities and Owners’ Equity
Current liabilities:
Short-term loans	$22,180	$23,900
Accounts payable	72,240	71,070
Salaries, wages, and other	26,300	26,780
Total current liabilities	$120,720	$121,750
Long-term debt	$160,620	$171,030
Total liabilities	$281,340	$292,780
Owners’ equity:
Common stock, at par	$43,840	$42,010
Paid-in capital in excess of par	64,020	61,260
Total paid-in capital	$107,860	$103,270
Retained earnings	151,960	114,320
Total owners’ equity	$259,820	$217,590
Total liabilities and owners’ equity	$541,160	$510,370

Required:

1. Calculate the following financial ratios for 2016 for CCB Enterprises:

Round items h, j, and k to the nearest whole number. Round all other answers to two decimal places. Assume a 360-day year.

a. Times interest earned	to 1
b. Return on total assets	%
c. Return on common stockholders' equity	%
d. Debt-to-equity ratio (at December 31, 2016)	to 1
e. Current ratio (at December 31, 2016)	to 1
f. Quick (acid-test) ratio (at December 31, 2016)	to 1
g. Accounts receivable turnover ratio (Assume that all sales are on credit.)	times
h. Number of days' sales in receivables	days
i. Inventory turnover ratio (Assume that all purchases are on credit.)	times
j. Number of days' sales in inventory	days
k. Number of days in cash operating cycle	days

2. Which of the following statements pertaining to ratio analysis of CCB Enterprises is true?
All of these are true.