E10-13B. Ratio Analysis Presented below are summary financial data from the Jack

Question

E10-13B. Ratio Analysis Presented below are summary financial data from the Jackson Co. annual report: Amounts in millions Balance sheet Cash and cash equivalents . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . .. . . . . . . 2,200 Total assets 155,000 ....30,000 Shareholders' equity .. Income Statement Interest expense. Net income before taxes . . . . 6,400 36,800 .. . . .. . . . . . . .. . . . .. . . . . . .. . . . . . . . . . . . . . . . . . .. Calculate the following ratios: a. Times-interest-earned ratio b. Quick ratio c. Current ratio

Explanation / Answer

a) Time interest earned ratio = Earning before interest and tax/interst expenses

                                         = (36800+6400)/6400

TIme interest earned ratio = 6.75 TImes

b) Quick ratio = (Cash+marketable securities+account receivable)/Current liabilities

                    = (2200+16200+10000)/30000

Quick ratio = 0.95:1

C) Current ratio = Current assets/current liabilities

                      = 42000/30000

Current ratio = 1.4:1

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