Financial Data for Springfield Power Co. as of December 31, 2004: Inventory $200
ID: 2787662 • Letter: F
Question
Financial Data for Springfield Power Co. as of December 31, 2004:
Inventory $200,000
Long-term debt $300,000
Interest expense $15,000
Accumulated depreciated $440,000
cash $260,000
Net Sales (all credit) $1,500,000
Common Stock $800,000
Accounts receiveables $225,000
Operating expenses (incl. depr. Exp. and taxes) $525,000
Notes payables-current $180,000
Cost of goods sold $940,000
Plant and Equipment $1,300,000
Accounts Payable $160,000
Marketable securities $90,000
Accured wages $65,000
Retained earnings $130,000
From the information above, calculate the follwoing ratios for the Springfield Power Co.
1. Current ratio
2. Acid test ratio
3. Average collection period
4. inventory turnover
5. Gross profit margin
6. operating profit margin
7. net profit margin
8. total asset turnover
9. times-interest-earned
Explanation / Answer
Current Ratio = Current Asset/Current Liabilities
Current Asset = Inventory + cash + Accounts Receivable + Marketable Securities = 2,00,000+ 2,60,000+ 2,25,000+ 90,000 = 775,000
Current Liabilities = Notes Payable + Accrued Wages + Accounts Payable = 180000+ 160000 + 65000 = 405000
Current Ratio = 775000/405000 = 1.91
Acid test Ratio = (cash + Cash Receivables + short investment)/ Current Liabilities
= (260000+225000+90000)/ 405000 = 575000/405000 = 1.42
Average collection period = 365 * sales /average Receivables
Receivables = 225000
Average Collection Period = 365* 1500000/225000
= 365* 6.67 = 2433.33
Inventory Turnover = Average inventory/Cost of goods sold * 365
= 200000/940000* 365 = 0.212065* 365 = 77.66
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