Example 2 During the floods, some data in the balance sheetand the profit and lo

Question

Example 2 During the floods, some data in the balance sheetand the profit and loss statement were dismantled. Fill in the missing data using the following information. Balance sheet Assets tota Long-term asset Current assets Inventories Accountreceivable Cash Total capital Owner's capital Long-termliabilities Currentliabilities 500 200 Income Statement Sales Cost of goods sold Depreciation Inventories EBIT Interest EBT Total capital Tax EAT 400 100 Financial leverage TIE Current ratio Quick ratio Cash ratio ROE Inventoryturnover 1.8 4 1.9 1.3 0.35 0.25 6

Explanation / Answer

Solution :- Current ratio = Current assets / Current liabilities

1.9 = Current assets / 200

Current assets = 200 * 1.9

Current assets = $ 380.

Cash ratio = Cash / Current liabilities

0.35 = Cash / 200

Cash = 200 * 0.35

Cash = $ 70.

Quick ratio = (Cash + Account receivable) / Current liabilities.

1.3 = (70 + Account receivable) / 200

(70 + Account receivable) = 1.3 * 200

Account receivable = 260 - 70

Account receivable = $ 190.

Inventories = Total current assets - Cash - Accounts receivable.

Inventories = 380 - 70 - 190

Inventories = $ 120.

Financial leverage ratio = Total debt / Owner's capital

1.8 = Total debt / 500

Total debt = 1.8 * 500

Total debt = $ 900.

Long-term liabilities = Total debt - Current liabilities.

Long-term liabilities = 900 - 200

Long-term liabilities = $ 700.

Long-term assets = Total debt + Owner's capital - Current liabilities.

Long-term assets = 900 + 500 - 200

Long-term assets = $ 1200.

Earnings after tax (EAT) = Owner's capital * Return on equity

Earnings after tax (EAT) = 500 * 0.25

Earnings after tax (EAT) = $ 125.

Conclusion :-

Total current assets $ 380 Cash $ 70 Account receivable $ 190 Inventories $ 120 Long-term liabilities $ 700 Long-term assets $ 1200 Earnings after tax (EAT) $ 125

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