Crowley Building Supply sells various building materials to retail outlets. The

Question

Crowley Building Supply sells various building materials to retail outlets. The company has just approached Sycamore State Bank requesting a $300,000 loan to strengthen the Cash account and to pay certain pressing short-term obligations. The company's financial statements for the most recent two years follow: Crowley Building Supply Comparative Balance Sheets This Year Last Year Assets Current assets: Cash Marketable securities Accounts receivable, net Inventory Prepaid expenses 1,500 476,000 948,560 19,500 S 56,500 141,500 19,500 288,000 588,530 26,500 Total current assets Plant and equipment, net 1,502,060 1,641,620 1,064,030 1,546,580 Total assets $ 3,143,680$ 2,610,610 Liabilities and Stockholders' Equity Liabilities Current liabilities Bonds payable, 8% $ 806,000 616,500 $445,000 616,500 Total liabilities 1,422,500 1,061,500 Stockholders' equity: Preferred stock, $25 par, 7% Common stock, $10 par Retained earnings 318,000 510,000 893,180 318,000 510,000 721,110 Total stockholders' equity 1,721,180 1,549,110 Total liabilities and stockholders' Equity $ 3,143,680 $ 2,610,610

Explanation / Answer

a. Working capital = Current assets - Current liabilities

b. Current ratio = Current assets / Current liabilities

c. Acid test ratio = (Cash + Marketable securities + Accounts receivable) / Current liabilities

0.66  

[(56,500+1,500+476,000) / 806,000]

1.01

[(141,500+19,500+288,000) / 445,000]

d. Accounts receivable turnover = Sales / Accounts receivable

10.55

(5,021,000 / 476,000)

15.15

(4,363,000 / 288,000)

Average collection period = 365 / Accounts receivable turnover

e. Inventory turnover = Cost of goods sold / Inventory

Average sale period = 365 / Inventory turnover

f. Debt to equity ratio = liabilities / equity

g. Times interest earned = Operating income / Interest

This year Last year Working capital 696,060 (1,502,060-806,000) 619,030 (1,064,030-445,000)

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects

---

---

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