Financial statements for Rarett Company appear below:

Rarett Company
Income Statement
For the Year Ended December 31, 2002
(dollars in thousands

Sales (all on account)............................. $1,900
Cost of goods sold................................. $1,330
Gross margin........................................ $570
Operating expenses................................ $220
Net operating income............................. $350
Interest expense................................... $40
Net income before taxes......................... $310
Income taxes (30%).............................. $93
Net income........................................... $217

Required:
a. Current ratio
b. Acid-test (quick) ratio.
c. Average collection period (age of receivables).
d. Inventory turnover
e. Times interest earned
f. Debt-to-equityratio.

Transcribed Image Text:

Karett Companv Statement of Financial Position December 31 2002 and 2001 dollars in thousands 2002 2001 Current assets: 110 S 150 S 140 S 80 S 480 S 110 150 140 80 480 Accounts receivable, net. Inventory. Prepaid expenses Total current assets Noncurrent assets Plant & equipment, net Total assets Current liabiities: Accounts payable Accrued liabilities Notes payable, short term. Total curent liabilities Noncurrent liabilities: Bonds payable Total liabilities Stockholders eqity Preferred stock. S 10 par, 1500 Common stock, S10 par Additional paid-in capital--common stock. S Retained earnings Total stockholders equity... Total liabilities & stockholders equity 1.100 S 1,580 S 1.050 1,530 60 S 100 S 160 S 320 S 110 180 360 390 S 710 S 400 760 120 S 180 S 170 S 400 S 870 S 1.580 S 120 180 170 300 770 1,530