Sprague Company has been operating for several years, and on December 31, 2008, presented the following balance sheet.

The net income for 2008 was $25,000. Assume that total assets are the same in 2007 and 2008.

Instructions
Compute each of the following ratios. For each of the four indicate the manner in which it is computed and its significance as a tool in the analysis of the financial soundness of the company.
(a) Current ratio.
(b) Acid-test ratio.
(c) Debt to total assets.
(d) Rate of return onassets.

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Sprague Company Balance Sheet December 31, 2008 40,000 Accounts payable 75,000 Mortgage payable Cash Receivables Inventories Plant assets (net) $80,000 140,000 150,000 60,000 $430,000 95,000 220,000 $430,000 Common stock ($1.00 par) Retained earnings