Use the information from the balance sheet and income statement below to calculate the following ratios: Current

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Use the information from the balance sheet and income statement below to calculate the following ratios:

Current ratio ................................ Days in receivables

Acid-test ratio ...................... Operating return on assets

Times interest earned ................................. Debt ratio

Inventory turnover ............................ Return on equity

Total asset turnover ...................... Fixed-asset turnover

Operating profit margin

Cash ..................................... $100,000

Accounts receivable ..................... 30,000

Inventory ................................. 50,000

Prepaid expenses .........................10,000

Total current assets .................. $190,000

Gross plant and equipment ........... 401,000

Accumulated depreciation ........... (66,000)

Net fixed assets

Total assets ........................... $525,000

Accounts payable ..................... $ 90,000

Accrued liabilities ...................... 63,000

Total current debt ................... $153,000

Long-term debt ....................... 120,000

Common stock ........................ 205,000

Retained earnings ..................... 47,000

Total debt and equity .............. $525,000

Income Statement 1/1/2015 -12/31/2015

Sales* ................................................... $210,000

Cost of goods sold ......................................... (90,000)

Gross profit ............................................ $120,000

Selling, general, and administrative expenses ...... (29,000)

Depreciation expense ................................... (26,000)

Operating profits .................................... $ 65,000

Interest expense ........................................ (8,000)

Earnings before taxes ................................. $57,000

Taxes .................................................. (16,000)

Net income .......................................... $ 41,000

* 12% of sales are cash sales.

Asset Turnover
Asset turnover is sales divided by total assets. Important for comparison over time and to other companies of the same industry. This is a standard business ratio.
Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...
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Foundations Of Finance

ISBN: 9780134083285

9th Edition

Authors: Arthur J. Keown, John H. Martin, J. William Petty

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