Question

The balance sheet and income statement for the A. Thiel Mfg. Company are as follows. Calculate the ratios at the bottom.
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

Answer 1

Answer:

Computation of Current Ratio Current Ratio = Current Assets/Current Liabilities Current Assets $ 3,500 Current Liabilities $ 2,000 Current Ratio 1.75 Calculation (3,500/2,000) Computation of Times interest earned ratio Times interest earned ratio = Earnings before interest and taxes/Interest expense Earnings before interest and taxes $ 1,700 Interest expense $ 367 Times interest earned ratio 4.63 Calculation (1,700/367) Computation of Inventory Turnover Inventory Turnover = Cost of goods sold/Average Inventory Since, average inventory can not be calculated from the data given in the question, we will use closing inventory. Cost of goods sold $ 3,300 Inventory 1,000 Inventory Turnover (times) 3.30 Calculation (3,300/1,000)

Answer:

Computation of Total Asset Turnover Asset Turnover = Sales/Average Total Assets Since, average total assets can not be calculated from the data given in the question, we will use closing total assets. Sales $ 8,000 Total Assets $ 8,000 Asset Turnover Calculation (8,000/8,000) 1.00 Computation of Operating Profit Margin Operating Profit Margin = (Operating Profit/Sales) X 100 Operating Profit $ 1,700 Sales $ 8,000 Asset Turnover 21.25% Calculation (1,700/8,000) Computation of Operating Return on Assets Return on total assets = (Earnings before Interest and Taxes/Average Total assets) X 100 Since, average total assets can not be calculated from the data given in the question, we will use closing total assets. Earnings before interest and taxes $ 1,700 Total Assets $ 8,000 Return on total assets 21.25% Calculation (1,700/8,000) X 100

Answer:

Computation of Debt Ratio Debt to Asset Ratio = Total Liabilities/Total Assets Total Liabilities 4,000 Calculation (2,000 + 2,000) Total Assets 8,000 Debt Ratio 0.50 Calculation (4,000/8,000) Computation of Days in Receivables Days in receivables = (Accounts Receivable/Sales) X 365 Accounts Receivables 2,000 Sales $ 8,000 Days in receivables 91.25 Calculation (2,000/8,000) X 365 Computation of Fixed Asset Turnover Fixed Asset Turnover = Net Sales/Average Net Fixed Assets Since, average net fixed assets can not be calculated from the data given in the question, we will use closing net fixed assets. Net Sales $ 8,000 Net Fixed Assets $ 4,500 Fixed Asset Turnover 1.78 Calculation (8,000/4,500)

Answer:

Computation of Return on Equity Return on Equity = (Net Income/Owners Equity) X 100 Net Income 800 Equity $ 4,000 Debt to equity ratio 20% Calculation (800/4,000)