The balance sheet and income statement for a company are shown below. Balance Sh

Question

The balance sheet and income statement for a company are shown below. Balance Sheet Cash $45,500 Accounts Payable $98,000 Receivables 256,000 Notes Payable 39,000 Inventories 141,500 Other Current Liabilities 121,000 Total Current Assets $443,000 Total Current Liabilities $258,000 Net Fixed Assets 160,500 Long-term debt 147,500 Total Liabilities $405,500 Common equity 262,000 Total Assets $603,500 Total Liabilities and equity $667,500 Income Statement Sales $1,404,500 Cost of goods sold 1,240,000 Selling, general, and administrative expenses 91,000 Earnings before interest and taxes (EBIT) $73,500 Interest expense 12,500 Earnings before taxes (EBT) $61,000 Federal and state income taxes (40%) 24,400 Net income $36,600 Compute the following ratios for the company. a) Current ratio b) Quick ratio c) Inventory turnover ratio d) Days sales outstanding (Assume 365 days in a year) e) Fixed assets turnover ratio f) Total assets turnover ratio g) Debt ratio h) Times-interest-earned ratio

Explanation / Answer

Balance Sheet
Cash $45,500 Accounts Payable $98,000
Receivables 256,000 Notes Payable 39,000
Inventories 141,500 Other Current Liabilities 121,000
Total Current Assets $443,000 Total Current Liabilities $258,000
Net Fixed Assets 160,500 Long-term debt 147,500
Total Liabilities $405,500
Common equity 262,000
Total Assets $603,500 Total Liabilities and equity $667,500

Income Statement
Sales $1,404,500
Cost of goods sold 1,240,000
Selling, general, and administrative expenses 91,000
Earnings before interest and taxes (EBIT) $73,500
Interest expense 12,500
Earnings before taxes (EBT) $61,000
Federal and state income taxes (40%) 24,400
Net income $36,600

a) current ratio = current assets/current liabilities
=443000/258000 = 1.717

b) Quick Ratio = (Current Assets - Inventories) / Current Liabilities
=(443,000-141,500)/258,000
=441,500/258,000
=1.7112

c)inventory turnover=cost of goods sold/average inventory

= 1,240,000/141,500
=8.763

d)Day Sales Outstanding = (Total Receivables/Total Credit Sales) x Number of Days in the measurement period

=(256,000/(98,000+39,000)) x 365

=682.0437

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