Question

Ratios Compared with Industry Averages You are analyzing the performance of Lumite Corporation, a manufacturer of personal care products, for the most recent year. The following data are taken from the firm's latest annual report: Dec. 31, 2013 Dec. 31, 2012 Quick assets $330,000 $290,000 Inventory and prepaid expenses 985,000 860,000 Other assets 4,165,000 3,700,000 Total Assets $5,400,000 $4,770,000 Current liabilities $540,000 $440,000 10% Bonds payable 1,340,000 1,340,000 7% Preferred stock 900,000 900,000 Common stock, $5 par value 1,900,000 1,800,000 Retained earnings 800,000 370,000 Total Liabilities and Stockholders' Equity $5,400,000 $4,770,000 In 2013, net sales amount to $8,800,000, net income is $695,000, and preferred stock dividends paid are $65,000. Required Calculate the following ratios for 2013. Round answers to two decimal places

3. Return on common stockholders' equity Answer 0 %

4. Quick ratio Answer 0

5. Current ratio Answer 0

6. Debt-to-equity ratio Answer 0

Answer 1

3. Return on common stockholders' equity = [Net income - preferred stock dividends] / Average Stock holders Equity * 100

Average Stock holders Equity = [1900000+1800000]/2 = 1850000

Return on common stockholders' equity = [695000-65000] / 1850000 * 100 = 34.05%

4. Quick ratio = Quick Assets / Current Liabilities = 330000/540000 = 0.6111

5. Current ratio = Current Asset / Current Liabilities = [330000+985000] / 540000 = 2.44

6. Debt-to-equity ratio = Total Liabilities / Shareholders' Equity =

= [540000+1340000] / [900000+1900000+800000] = 1880000/3600000 = 0.52