Question 1 Crane Medical manufactures hospital beds and other institutional furn

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Question 1 Crane Medical manufactures hospital beds and other institutional furniture. The company's comparative balance sheet and income statement for 2015 and 2016 follow Crane Medical Comparative Balance Sheet As of December 31 2016 2015 Assets Current assets Cash Accounts receivable, net Inventory Other current assets $366,000 $417,400 776,450 681,100 247,050 2,563,350 2,122,000 8,440,015 $11,229,790 $10,562,015 1,080,000 736,000 381,350 Total current assets Property, plant, & equipment, net 8,666,4408, Total assets Liabilities and Stockholders' Equity Current liabilities Long-term debt $3,169,000 $2,846,000 3,702,600 3,892,700 6,738,700 59,000 103,800 4,194,590 3,660,515 3,823,315 $11,229,790 $10,562,015 Total liabilities Preferred stock, $5 par value Common stock, $0.25 par value Retained earnings 6,871,600 59,000 104,600 Total stockholders' equity Total liabilities and stockholders 4,358,190 equity

Explanation / Answer

Working capital = Current assets - Current liabilities Working capital = $2,563,350 - 3,169,000 = -$605,650 Current ratio = Current assets / current liabilities Current ratio = $2,563,350 / $3,169,000 = 0.81 Acid test ratio = (Current assets - Inventory) / Current liabilities Acid test ratio = ($2,563,350-$736,000) / $3,169,000 = 0.58 Accounts receivable turnover = Net credit sales / Average accounts receivable Accounts receivable turnover = $10,177,250 / (($1,080,000+$776,450)/2) = 10.96 Times

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