Bethesda Mining Company reports the following balance sheet information for 2015

Question

Bethesda Mining Company reports the following balance sheet information for 2015 and 2016.

Based on the balance sheets given for Bethesda Mining, calculate the following financial ratios for each year:

a. Current ratio. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)

b. Quick ratio. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)

c. Cash ratio. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)

d. Debt?equity ratio and equity multiplier. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)

e. Total debt ratio. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)

BETHESDA MINING COMPANY
Balance Sheets as of December 31, 2015 and 2016 2015 2016 2015 2016 Assets Liabilities and Owners’ Equity Current assets Current liabilities Cash $ 50,434 $ 63,944 Accounts payable $ 189,922 $ 197,611 Accounts receivable 62,281 82,639 Notes payable 85,020 136,588 Inventory 123,735 189,433 Total $ 274,942 $ 334,199 Total $ 236,450 $ 336,016 Long-term debt $ 237,000 $ 173,750 Owners’ equity Common stock and paid-in surplus $ 218,000 $ 218,000 Fixed assets Accumulated retained earnings 164,655 199,745 Net plant and equipment $ 658,147 $ 589,678 Total $ 382,655 $ 417,745 Total assets $ 894,597 $ 925,694 Total liabilities and owners’ equity $ 894,597 $ 925,694

Explanation / Answer

a. Current Ratio= Current Asset/ Current Liabilities

For 2015:
= $ 236450/ 274942
= 0.86 times

For 2016:
= $ 336016/ 334199
= 1.01 times

b. Quick Ratio= (Current Asset- Inventory)/ Current Liabilities

For 2015:
=$ (236450-123735)/ 274942
= 0.41 times

For 2016:
= $ (336016-189433)/ 334199
= 0.44 times

c. Cash ratio= Cash & Cash equivalents / Current Liabilities

For 2015:
= $ 50434/ 274942
= 0.18 times

For 2016:
= $ 63944/ 334199
= 0.19 times

d. Debt Equity Ratio= Total Liabilities/ Sharesholders equity

For 2015:
= $ 511942/ 382655
= 1.33 times

For 2016:
= $ 507949/ 417745
= 1.22 times

Equity Multiplier= Total Assets/ Stockholder's Equity

For 2015:
= $ 894597/ 382655
= 2.34 times

For 2016:
= $ 925694/ 417745
= 2.22 times

e. Total debt ratio= Total liabilities/ total assets

For 2015:
= $ 511942/ 894597
= 0.57 times

For 2016:
= $ 507949/ 925694
= 0.55 times

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