Question

1 Condensed financial statements for Games Galore are summarized below: 2 3 Balance Sheet 4 Cash 2016 2015 185,000 $ 143,00024 Operating Expenses 25 Income from Operations 891,400 190,600 26 Interest Expense 14,500 27 Income before Income Tax Expens32 Compute the following liquidity ratios for 2016. Round to the 33 required number of decimal places USING THE EXCEL. 34 ROU

  1. Use ratios to analyze a company's liquidity and solvency.
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1 CURRENT RATIO 380900/85300                   4.5 to 1
CURRENT RATIO=CURRENT ASSETS/CURRENT LIABILITIES
current assets            380,900.00
current liabilities              85,300.00
2 receivables turnover=net credit sales/average accounts receivable
net credit sales        3,031,000.00
average accounts receivable=(opening receivable+closing recivable)/2
(80000+59000)/2
             69,500.00
receivables turnover= 3031000/69500
                      43.61 times
3 Days to collect=average accounts receivable/(annual sales/365 days)
69500/(3031000/365)
69500/8304.11
                        8.00 days
4 inventory turnover=cost of goods sold /average inventory
cost of goods sold        1,949,000.00
average inventory=(opening inventory+closing inventory)/2
(104000+134000)/2
           119,000.00
inventory turnover= 1949000/119000
                      16.38 times
5 days sales in inventory=365/inventory turnover ratio
365/16.38
                      22.00 days
6 debt to assets=total debt/total assets
total debt=total liabilities=369300
total assets            895,400.00
debt to asset ratio= 369300/895400
                        0.41 to 1
7 times interest earned=income before interest and tax/interest expense
income before incometax    176,100.00
add:interest      14,500.00
income before interest and tax    190,600.00
interest expense      14,500.00
times interest earned= 190600/14500
                        13.1 times
8 Profit margin ratio (NET INCOME*100)/saLES
Net income            129,100.00
Sales        3,031,000.00
Profit margin ratio (129100*100)/3031000
                        4.30 %
9 gross profit margin (Gross profit*100)/Sales
Gross Profit        1,082,000.00
gross profit margin (1082000*100)/3031000
                      35.70 %
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