The financial statements for Castile Products, Inc., are given below Castile Pro

Question

The financial statements for Castile Products, Inc., are given below Castile Products, Inc. Balance Sheet Decenber 31 Assets Cur rent assets: $21, 000 190, 000 320, 000 9, 000 540, 000 890, 000 $1, 430, 000 Accounts receiv 1e, net Mer chandise inventory Prepaid expenses Total current assets Property and equipment, net Total assets Liabilities and Stockholders Equity Liabilities $ 220, 000 320, 000 540, 000 Current liabilities Bonds payable, 11% Total 1iabilities Stockholders' equity $ 130, 000 760, 000 890,000 $1, 430, 0OD Connon stock, $5 par value Retained eamings Total stockholders equity Total liabilities and stockholders equity Castile Products, Inc. Incone Statememt For the Year Ended December 31 Sales Cost of goods sold Gross nargin Selling and adninistrative expenses Net operating income Interest expense Net income before taxes Income taxes (30% Net income $2, 590, 000 1, 323, 000 1, 267, 000 620,000 647·000 35-200 611·800 183, 540 $428, 250 Account balances at the beginning of the year were: accounts receivable, $180,000; and inventory, $310,000. All sales wer account. Required: Compute the following financial data and ratios 1. Working capital 2. Current ratio. (Round your answer to 1 decimal place.) 3. Acid-test ratio. (Round your answer to 2 decimal places.) 4. Debt-to-equity ratio. (Round your answer to 2 decimal places.) 5. Times interest earned ratio. (Round your answer to 2 decimal places.) 6. Average collection period. (Use 365 days in a year. Round your answer to 1 decimal place.) 7. Average sale period. (Use 365 days in a year. Round your intermediate calculations and final answer to 1 decimal plac 8. Operating cycle. (Round your intermediate calculations and final answer to 1 decimal places.) 1. Working capital 2. Current ratio 3. Acid-test ratio 4. Debt-to-equity ratio 5. Times interest earned ratio 6. Average collection period 7. Average sale period 8. Operating cycle days days days

Explanation / Answer

1. Working capital = Current assets-current liabilities

= 540000-220000

Working capital = 320000

2. Current ratio = Current assets/current liabilities

= 540000/220000

Current ratio = 2.5:1

3. Acid test ratio = (Cash+account receivable)/Current liabilities

= (21000+190000)/220000

Acid test ratio = 0.96:1

4. Debt to equity ratio = Total debt/total equity

= 540000/890000

Debt to equity ratio = 0.61:1

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