Use the information in E5.14 for Carmichael Industries. Instructions a. Calculate the current and acid-test ratios for
Question:
Use the information in E5.14 for Carmichael Industries.
Instructions
a. Calculate the current and acid-test ratios for 2019 and 2020.
b. Calculate Carmichael?s current cash debt coverage ratio for 2020.
c. Based on the analyses in parts (a) and (b), comment on Carmichael?s liquidity and financial flexibility.
d. Calculate Carmichael?s payout ratio. From the company?s perspective, is the ratio too high? What would be a reasonable payout ratio?
E5.14
A comparative statement of financial position for Carmichael Industries Inc. follows:
Additional information:
1. Net income for the fiscal year ending December 31, 2020, was $129,000.
2. Cash dividends of $60,000 were declared and paid. Dividends paid are treated as financing activities.
3. Bonds payable amounting to $50,000 were retired through issuance of common shares.
4. Land was sold at a gain of $5,000.
5. No equipment was sold during the year.
Step by Step Answer:
Intermediate Accounting Volume 1
ISBN: 978-1119496496
12th Canadian edition
Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield, Irene M. Wiecek, Bruce J. McConomy