Question: Costner Company has been operating for several years, and on December 31, 2012, presented the following balance sheet. The net income for 2012 was $25,000.

Costner Company has been operating for several years, and on December 31, 2012, presented the following balance sheet.

Costner Company has been operating for several years, and on December 31,

The net income for 2012 was $25,000. Assume that total assets are the same in 2011 and 2012.

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. (c) Debt to total assets.
(b) Acid-test ratio. (d) Rate of return on assets.

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a Current ratioCurrent ratio is computed by dividing current assets by current liabilities In this case the current assets are cash receivables and in... View full answer

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