Please help me answer this question value: 5.00 points The financial statements

Question

Please help me answer this question

value: 5.00 points The financial statements for Castile Products, Inc., are given below: Castile Products, Inc. Balance Sheet December 31 Assets Current assets $ 6,500 35,000 70,000 3,500 Cash Accounts receivable, net Merchandise inventory Prepaid expenses 115,000 185,000 Total current assets Property and equipment, net Total assets Liabilities and StockholdersS' Equity $300,000 Liabilities Current liabilities Bonds payable, 10% $50,000 80,000 130,000 $ 30,000 Total liabilities Stockholders' equity: Common stock, $5 par value Retained earnings 140,000 170,000 $300,000 Total stockholders' equity Total liabilities and equity Castile Products, Inc. Income Statement For the Year Ended December 31 Sales Cost of goods sold $420,000 292,500 Gross margin Selling and administrative expenses 127,500 89,500 Net operating income Interest expense 38,000 8,000 Net income before taxes Income taxes (30%) 30,000 9,000 Net income $21,000 Account balances at the beginning of the year were: accounts receivable, $25,000; and inventory $60,000. All sales were on account. Required: Compute the following financial data and ratios 1. Working capital

Explanation / Answer

1) Working Capital = Current Assets - Current LIabilities

Working Capital = 115000-130000 = $(15000)

Working Capital ratio = currnet Assets/Current liabilities = 115000/130000 = 0.89

2) Current ratio = Current Assets /Current Liabilities

Current ratio = 115000/130000 = 0.89

3) Acid Test ratio = Current Assets - Merchandise inventroy /Current Liabilities

Acid Test ratio = (115000 - 70000)/130000 = 45000/130000 = 0.35

4) Debt to Equity ratio = total debt /total equity

=130000/170000 = 0.76

5) Times Interest earned ratio = EBIT/Interst expense = 38000/8000= 4.75

6) Average Colection Period = Accounts Receivable/Annual salesx365 = 35000/420000x365 = 30.42 days

7) Average Sales Period =Days in sales/Inventory turnover ratio

Inventory turnover ratio = Inventory /COGS x365 = 70000/292500x365 = 87.35

Average Sales Period = 365/87.35 = 4.17

8)Operating Cycle = Average Sales period+Average Collection Period - days payable outstanding(Accounts payable /COGSx365)

= 87.35+ 30.42 - 62.39 = 55.38 days

Related Questions

Navigate

• Browse (All)
• Browse P
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.