Balance Sheet: $(000)$

Cash $$500$

Accounts receivable $2,000$

Inventories $1,000$

Current assets $$3,500$

Net fixed assets $4,500$

Total assets $$8,000$

Accounts payable $$1,100$

Accrued expenses $600$

Short$-$term notes payable $300$

Current liabilities $$2,000$

Long$-$term debt $2,000$

Owners' equity $4,000$

Total liabilities and owners' equity $$8,000$

Income Statement: $(000)$

Sales $($all credit$)$ $$8,000$

Cost of goods sold $3,300$

Gross profit $$4,700$

Operating expenses $($includes $$500$ depreciation$)3,000$

Operating profit $$1,700$

Interest expense $367$

Earnings before taxes $$1,333$

Income taxes $(21\%)280$

Net income $$1,053$

SOLUTION

Calculate the following ratios:

Current ratio

Debt ratio

Times interest earned

Average collection period

Inventory turnover

Fixed$-$asset turnover

Total assets turnover

Operating profit margin

Operating return on assets

Return on equity

Requirements:

$"1.$ Start Excel. Download and open the workbook named:

Keown$\_$Martin$\_$Petty$\_$Problem$\_4-6\_$Start.

Important note: All calculations must be shown using cell references. Do NOT enter absolute numbers in the cells.

$"$

$2.$ In cell B$36,$ calculate the current ratio. $(1$ point$)$

$3.$ In cell B$37,$ calculate the debt ratio. $(1$ point$)$

$4.$ In cell B$38,$ calculate the times interest earned. $(1$ point$)$

$5.$ In cell B$39,$ calculate the average collection period. $(1$ point$)$

$6.$ In cell B$40,$ calculate the inventory turnover. $(1$ point$)$

$7.$ In cell B$41,$ calculate the fixed$-$assets turnover. $(1$ point$)$

$8.$ In cell B$42,$ calculate the total assets turnover. $(1$ point$)$

$9.$ In cell B$43,$ calculate the operating profit margin. $(1$ point$)$

$10.$ In cell B$44,$ calculate the operating return on assets. $(1$ point$)$

$11.$ In cell B$45,$ calculate the return on equity. $(1$ point$)$

# $4,4-6$