Question

The balance sheet and the income statement of “Omega” Company containing data in € is as follows: Balance Sheet 20X1 Assets Fixed assets: Property, plant and equipment Less accumulated depreciation Net property, plant and equipment Total fixed assets 5,500,000 1,075,000 6,575,000 Current assets: 44EUL 3,500,000 20X1 Liabilities & Stockholders' Equity Stockholders' equity: 11,000,000 Common stock (3,925,000) Retained earnings 7,075,000 Total stockholders' equity 7,075,000 Long - term liabilities: Long-term debt 700,000 Total long-term liabilities 800.000 Current liabilities: 1,650,000 Accounts payable 2,100,000 Short-term debt 750,000 Total current liabilities 6,000,000 Total liabilities Total liabilities & stockholders' equity 13,075,000 3,500,000 Cash and cash equivalents Marketable securities Accounts receivables Inventory Prepaid expenses Total current assets 700,000 2,300,000 3,000,000 6,500,000 Total assets 13,075,000

A.
Required:
1. Please calculate the following ratios and amounts: a) working capital,
current ratio, acid-test ratio, cash to current liabilities ratio, days’ sales
in receivables (based on ending accounts receivables), days’ sales in
inventory (based on cost of goods and ending inventory), operating cycle,
total debt to equity ratio and times interest earned. For your calculations,
assume that a year amounts for 360 days

Answer 1

The below amounts are Euro

working capital	current assets - current liabilities
	20X1
total current assets	6000000
total current liabilities	3000000
working capital	3000000
current ratio	current assets / current laibilities
	20X1
total current assets	6000000
total current liabilities	3000000
current ratio	2.00
acid-test ratio	acid assets / current liabilities
	20X1
total current assets	6000000
less: inventory	2100000
less: prepaid expenses	750000
acid assets	3150000
total current liabilities	3000000
acid-test ratio	1.05
cash to current liabilities ratio	cash and cash equivalent & marketable securities / current liabilities
	20X1
cash and cash equivalent	700000
marketable securities	800000
total current liabilities	3000000
cash to current liabilities ratio	0.50
days’ sales in receivables	(ending accounts receivable / net sales)*360
	20X1
ending accounts receivable	1650000
net sales	17499600
days’ sales in receivables	33.94
days’ sales in inventory	(ending inventory / cost of goods sold)*360
	20X1
ending inventory	2100000
cost of goods sold	13000000
days’ sales in inventory	58.15
operating cycle	days’ sales in receivables + days’ sales in inventory
	20X1
days’ sales in receivables	33.94
days’ sales in inventory	58.15
operating cycle	92.09
total debt to equity ratio	total liabilities / shareholders equity
	20X1
total liabilities	6500000
total shareholders equity	6575000
total debt to equity ratio	0.99
times interest earned	earnings before interest and tax / interest expense
	20X1
net operating income	900000
interest expense	400000
times interest earned	2.25