The 2018 balance sheet for Hallbrook Industries, Inc., is shown below. HALLBROOK
ID: 2396650 • Letter: T
Question
The 2018 balance sheet for Hallbrook Industries, Inc., is shown below.
HALLBROOK INDUSTRIES, INC. Balance Sheet December 31, 2018 ($ in 000s)
Assets
Cash $ 200
Short-term investments 150
Accounts receivable 200
Inventories 350
Property, plant, and equipment (net) 1,000
Total assets $ 1,900
Liabilities and Shareholders’ Equity
Current liabilities $ 400
Long-term liabilities 350
Paid-in capital 750
Retained earnings 400
Total liabilities and shareholders’ equity $ 1,900
The company’s 2018 income statement reported the following amounts ($ in 000s):
Net sales $ 4,600
Interest expense 40
Income tax expense 100
Net income 160
Required:
1. Calculate the current ratio.(Round your answer to 2 decimal places.)
2. Calculate the acid-test ratio. (Round your answer to 3 decimal places.)
3. Calculate the debt to equity ratio. (Round your answer to 2 decimal places.)
4. Calculate the times interest earned ratio. (Round your answer to 1 decimal place.)
1. Current ratio
2. Acid-test ratio
3. Debt to equity ratio
4. Times interest earned ratio .........times
Explanation / Answer
Cash 200 Short term investment 150 Accounts receivable 200 Inventory 350 Total current assets 900 Current liabilities 400 1 Current ratio = Current assets / current Liabilities Current ratio 2.25 2 Acid test ratio = (current assets - inventory )/ current liabilities Acid test ratio 1.38 3 Debt to equity ratio = Total liabilities / stockholders equity Total liabilities 750 (400+350) Stockholders equity 1150 (700+450) Debt equity ratio 0.65 4 Times interest charged = EBIT / interest expense EBIT = net income + income tax + interest expense Interest expense 40 EBIT 300 (160+100+40) Times interest charged 7.5 times
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