Use the following financial data to compute the requested ratios: Income stateme

Question

Use the following financial data to compute the requested ratios:
Income statement data
Sales (all on credit) $650,000
Cost of goods sold 425,000
Income before taxes 78,000
Net income 54,600

Balance sheet items Ending
Balances Beginning
Balances
Cash $ 19,500 $ 15,000
Accounts receivable (net) 65,000 60,000
Inventory 71,500 64,500
Plant and equipment (net) 195,000 183,900
Total assets $ 351,000 $ 323,400

Current liabilities $ 62,400 $ 52,700
Long-term notes payable 97,500 100,000
Calculate the following ratios for the current year. Show answers to a, b, and e to 2 decimal places; show answers to c, d, and f to 1 decimal place:
a. current ratio ___________
b. acid-test ratio ___________
c. accounts receivable turnover ___________
d. days

Explanation / Answer

A) current ratio (19,500 +65,000+71,500)/ 62,400= 2.5 B)Acid test (19,500+65,000)/62,400= 1.35 C)A/R turnover 650,000/62,500= 10.4 D) Days sales 365/10.4= 35.1 E) Inventory turnover 425,000/(71,500+64,500/2)= 6.25 F) Days sales 365/6.25= 58.4

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