Balance Sheet Assets: Cash and marketable securities $600,000 Accounts receivabl
ID: 2632072 • Letter: B
Question
Balance Sheet
Assets:
Cash and marketable securities
$600,000
Accounts receivable
900,000
Inventories
1,500,000
Prepaid expenses
75,000
Total current assets
$3,075,000
Fixed assets
8,000,000
Less: accum. depr.
(2,075,000)
Net fixed assets
$5,925,000
Total assets
$9,000,000
Liabilities:
Accounts payable
$800,000
Notes payable
700,000
Accrued taxes
50,000
Total current liabilities
$1,550,000
Long-term debt
2,500,000
Owner's equity (1 million shares of common stock outstanding)
4,950,000
Total liabilities and owner's equity
$9,000,000
Net sales (all credit)
$10,000,000
Less: Cost of goods sold
(3,000,000)
Selling and administrative expense
(2,000,000)
Depreciation expense
(250,000)
Interest expense
(200,000)
Earnings before taxes
4,550,000
Income taxes
(1,820,000)
Net income
$2,730,000
3a. Calculate the current ratio
3b. Calculate the average collection period.
3c. Calculate the debt ratio.
3d. Calculate the total asset turnover ratio.
3e. Calculate the operating profit margin
3f. Calculate the inventory turnover ratio
Assets:
Cash and marketable securities
$600,000
Accounts receivable
900,000
Inventories
1,500,000
Prepaid expenses
75,000
Total current assets
$3,075,000
Fixed assets
8,000,000
Less: accum. depr.
(2,075,000)
Net fixed assets
$5,925,000
Total assets
$9,000,000
Liabilities:
Accounts payable
$800,000
Notes payable
700,000
Accrued taxes
50,000
Total current liabilities
$1,550,000
Long-term debt
2,500,000
Owner's equity (1 million shares of common stock outstanding)
4,950,000
Total liabilities and owner's equity
$9,000,000
Net sales (all credit)
$10,000,000
Less: Cost of goods sold
(3,000,000)
Selling and administrative expense
(2,000,000)
Depreciation expense
(250,000)
Interest expense
(200,000)
Earnings before taxes
4,550,000
Income taxes
(1,820,000)
Net income
$2,730,000
Explanation / Answer
3a. Curret Ratio = Current Asset/Current Liabilities
=$3075000/1550000
=1.98
--------------------------------------------------------------------------------------------------------------
Average collection period = 365/(sales/average accounts recievable)
=365/(10000000/900000)
=32.85
-----------------------------------------------------------------------------------------------------------
3c Debt Raio = total liabilities/total assets
=(9000000-4950000)/9000000
=0.45
-----------------------------------------------------------------------------------------------------------
3d. Asset turnover ratio = sales/total assets
=10000000/9000000
=1.11 times
-------------------------------------------------------------------------------------------------------------
3e. Operating Profit Margin = operating profit/sales
=4550000/10000000
=0.46
--------------------------------------------------------------------------------------------------------------
3f. Inventory turnover ratio = cost of goods sold / inventory
=3000000/1500000
=2
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.