Live Ltd. reported the following comparative statement of financial position data: Additional information for 2012: 1. Profit
Question:
Live Ltd. reported the following comparative statement of financial position data:
Additional information for 2012:
1. Profit was $25,000.
2. Gross sales on account were $420,000. Sales returns and allowances on account amounted to $20,000.
3. Cost of goods sold was $198,000.
4. The allowance for doubtful accounts was $8,000 at the end of 2011, and $8,500 at the end of 2012.
5. Net cash provided by operating activities was $5,000.
Instructions
(a) Calculate the following ratios for 2012:
1. Current ratio
2. Receivables turnover
3. Average collection period
4. Inventory turnover
5. Days in inventory
6. Cash current debt coverage
7. Debt to total assets
8. Cash total debt coverage
9. Return on common shareholders' equity
10. Return on assets
(b) Indicate whether each of the above ratios is a measure of liquidity (L), solvency (S), or profitability (P)
SolvencySolvency means the ability of a business to fulfill its non-current financial liabilities. Often you have heard that the company X went insolvent, this means that the company X is no longer able to settle its noncurrent financial...
Step by Step Answer:
Financial Accounting Tools for Business Decision Making
ISBN: 978-1118024492
5th Canadian edition
Authors: Paul D. Kimmel, Jerry J. Weygandt, Donald E. Kieso, Barbara Trenholm, Wayne Irvine