Working capital. Operating cycle. (Round your intermediate calculations and fina

Question

Working capital.

       

       

       

      

       

       

       

Operating cycle. (Round your intermediate calculations and final answers to 1 decimal place.)

1.

Working capital.

The financial statements for Castile Products, Inc., are given below Castile Products, Inc. Balance Sheet December 31 Assets Current assets Cash Accounts receivable, net Merchandise inventory Prepaid expenses $ 19,000 210,000 360,000 6,000 Total current assets Property and equipment, net 595,000 890,000 Total assets $1,485,000 Liabilities and Stockholders' Equity Liabilities Current liabilities Bonds payable, 12% $ 270,000 390,000 660,000 $120,000 Total liabilities Stockholders' equity Common stock, $5 par value Retained earnings 705,000 825,000 $1,485,000 Total stockholders' equity Total liabilities and equity Castile Products, Inc. Income Statement For the Year Ended December 31 Sales Cost of goods solo $3,080,000 1,260,000 Gross margin Selling and administrative expenses 1,820,000 610,000 Net operating income Interest expense 1,210,000 46,800 Net income before taxes Income taxes (30%) 1,163,200 348,960 Net income $ 814,240 Account balances at the beginning of the year were: accounts receivable, $230,000; and inventory, $270,000. All sales were on account.

Explanation / Answer

1. Working Capital = Current assets - Current liabilities

= 595000 - 270000 = 325000

2. Current ratio = Current assets / Current liabilities

= 595000 / 270000 = 2.20

3.Acid test ratio = Current assets - inventory / (current liabilities )

= (1,485,000)- ( 270,000 ) / (270000)

= 4.5

4, Debit to equity ratio = total liabilities / shear holders equity

= 660000 / 825000

= 0.8

=80 %

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