Refer to the Kepler Company information as shown in Problem 16-45.

Required:

1. Compute the following ratios for each year:

a. Current ratio

b. Quick ratio

c. Receivables turnover (in days)

d. Inventory turnover (in days)

2. Has the liquidity of Kepler improved over the past year? Explain why industrial liquidity performance would be useful information in assessing Kepler’s liquidity performance.

Problem 16-45

Transcribed Image Text:

Kepler Company Comparative Balance Sheets This Year Last Year Assets Current assets: $ 50,000 300,000 600,000 $100,000 150,000 400,000 30,000 $680,000 150,000 $830,000 Cash Accounts receivable, net Inventory Prepaid expenses Total current assets 25,000 $ 975,000 125,000 $1,100,000 Property and equipment, net Total assets Liabilities and Stockholders' Equity Current liabilities: $ 400,000 200,000 $ 600,000 100,000 $ 700,000 Accounts payable Short-term notes payable $290,000 60,000 $350,000 150,000 $500,000 Total current liabilities Long-term bonds payable, 12% Total liabilities Stockholders' equity: Common stock (100,000 shares) Retained earnings Total liabilities and equity 200,000 200,000 $1,100,000 200,000 130,000 $830,000