Use the information from the balance sheet and income statement in the popup? wi
ID: 2437580 • Letter: U
Question
Use the information from the balance sheet and income statement in the popup? window, LOADING...?, to calculate the following? ratios: a. Current ratio b.? Acid-test ratio c. Times interest earned d. Inventory turnover e. Total asset turnover f. Operating profit margin g. Days in receivables h. Operating return on assets i. Debt ratio j. Fixed asset turnover k. Return on equity
Balance Sheet ASSETS
Cash $93,000
Accounts receivable 40,000
Inventory 46,000
Prepaid expenses 11,000
Total current assets $190,000
Gross plant and equipment 397,000
Accumulated depreciation (63,000)
Total assets $524,000
LIABILITIES AND OWNERS' EQUITY
Accounts payable $95,000
Accrued liabilities 67,000
Total current liabilities $162,000
Long-term debt 125,000
Common stock 206,000
Retained earnings 31,000
Total liabilities and equity $524,000
Income Statement Sales* $217,000
Cost of goods sold (89,000)
Gross profit $128,000
Selling, general, and administrative expenses (32,000)
Depreciation expenses (29,000)
Operating income $67,000 Interest expense (14,000)
Earnings before taxes $53,000
Taxes (21,200)
Earnings available to common shareholders $31,800
* 12% of sales are cash sales.
Explanation / Answer
Answer to Part a.
Current Ratio = Current Assets / Current Liabilities
Current Ratio = 190,000 / 162,000
Current Ratio = 1.17: 1
Answer to Part b.
Acid-Test Ratio = (Current Assets – Inventory – Prepaid Expenses) / Current Liabilities
Acid-Test Ratio = (190,000 – 46,000 – 11,000) / 162,000
Acid-Test Ratio = 133,000 / 162,000
Acid-Test Ratio = 0.82: 1
Answer to Part c.
Times Interest Earned Ratio = EBIT / Interest Expenses
Times Interest Earned Ratio = 67,000 / 14,000
Times Interest Earned Ratio = 4.79 times
Answer to Part d.
Inventory Turnover = Cost of Goods Sold / Inventory
Inventory Turnover = 89,000 / 46,000
Inventory Turnover = 1.93 times
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