Find the following ratios with the information provided by the balance sheet. a.
ID: 2636748 • Letter: F
Question
Find the following ratios with the information provided by the balance sheet.
a.??Current ratio
b.??Operating return on assets
c.??Times interest earned
d.??Debt ratio
e.??Inventory turnover
f.??Average collection period
g.??Total asset turnover
h.??Fixed asset turnover
i.??Operating profit marginj
j.??Return on equity
Cash $ 506
Accounts receivable 2,002
Inventories 1,003
Current assets $ 3,511
Net fixed assets 4,521
Total assets $ 8,032
Accounts payable $ 1,101
Accrued expenses 619
Short-term notes payable 284
Current liabilities $ 2,004
Long-term debt 1,981
Owners' equity 4,047
Total liabilities and owners' equity 8,032
Net sales (all credit) $ 7,976
Cost of goods sold -3,284
Gross profit $ 4,692
Operating expenses (includes $509 depreciation) -3,000
Operating income $ 1,692
Interest expense -344
Earnings before taxes $ 1,348
Income taxes (40%) -539
Net income 809
Explanation / Answer
Current ratio = Current assets / current liabilities
Current ratio = 3511 / 2004
= 1.75
Operating Return on Assets = EBIT/Average Total Asets
= 1692/8032 = 0.21
Times Interest earned = EBIT/Interest expense
=1692/344
=4.92
Debt ratio = total liabilties/total Assets
Total liabilities = 2004+1981 = 3985
Total Assets = 8032
debt ratio = 3985/8032
=0.49
Inventory turnover = Cost of goods sold/Average inventory
= 3284/1003
= 3.27
Average Collection Period = 365/receivables turnover
Receivables Turnover = Net credit sales/average Accounts Receivable
= 7976/2002
= 3.98
Average Collection Period = 365/receivables turnover
= 365/3.98
=91.7 or 92 days
Total Assets Turnover = Net sales / Avg total Assets
= 7976/8032
= 0.99
Fixed Assets turnover = Net sales /Avg Fixed Assets
= 7976/4521
=1.76
Operating Profit margin = Operating Income/net sales
=1692/7976
=0.21
Return on equity = Annual net income/ Shareholders Equity
= 809/4047
=0.20
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