Question

Problem # 1 (50 points) Given the Income Statement and Balance Sheet Compute: Current Ratio Acid-Test Ratio Days in Receivable Days in Inventory Operating Profit Margin Total Asset Tumover Fixed-asset turnover Debt Ratio Times Interest Earned Return on Equity Income Statement Balance Sheet Assets Cash Accounts Receivable Inventory Prepaid Expenses Total Current Assets Gross Plant and Equipment Accumulated Depreciation Net Fixed Assets Total Assets $200,000 $60,000 $100,000 $20,000 $380,000 $802,000 -$132,000 $670,000 $1,050,000 Sales (all credit) Cost of Goods Sold Gross Profit Selling and General Expenses Depreciation Expense Operating Profit Interest Expense Earnings Before Taxes Taxes Net Income $420,000 $180,000 $240,000 $58,000 $52,000 $130,000 $16,000 $114,000 $32,000 $82,000 Liabilities and Equity Accounts Payable Accrued Liabilities Total current Liabilities Long Term Debt Total Liabilities Common Stock Retained Earnings Total Equity Total Liabilities and Equity $180,000 $126,000 $306,000 $240,000 $546,000 $410,000 $94,000 $504,000 S1,050,000 Current Ratio Total Asset Turnover Acid-Test Ratio Fixed-asset tumover Days in Receivable Debt Ratio Days in Inventory Times Interest Earned Operating Profit Margin Return on Equity

Answer 1

Current Ratio
	Current Ratio	=	Current Assets / Current Liabilities
		=	$ 380,000 / $ 306,000
		=	1.24
Acid-Test Ratio
	Acid-Test Ratio	=	(Current Asset - Inventories)/Current Liabilities
		=	( $ 380,000 - $100,000)/ $ 306,000
		=	$280,000/$306,000
		=	0.92
Day in Receivable
	Day in Receivable	=	Account Receivable / Net Credit Sale X 365 Days
		=	$60,000 / $420,000 X 365
		=	0.14 X 365 Days
		=	52 Days
Days In Inventory
	Average Inventory	=	Opening Inventory + Closing Inventory/2
		=	$0 + $100,000 / 2
		=	$50,000
	Days In Inventory	=	Average Inventory/COGS( Cost of goods sale) X 365 Days
		=	$50,000 / $180.000 X 365 Days
		=	0.28 X 365 Days
		=	101 Days
Operating Profit Margin
	Operating Profit Margin	=	Operating Income / Sales Revenue
		=	$130,000 / $420,000
		=	0.31
Total Asset Turnover
	Average Asset	=	Opening Asset + Closing Asset / 2
		=	$802,000 + $670,000 / 2
		=	$1472000 / 2
		=	$736,000
	Total Asset Turnover	=	Total Sale / Average Assets
		=	$420,000 / $736,000
		=	0.57
Fixed-Asset turnover
	Fixed-Asset turnover	=	Net Sale / (Fixed Asset - Accumulated Depreciation)
		=	$420,000 / ($802,000 - $132,000)
		=	$420,000 / $670,000
		=	0.63
Debt Ratio
	Debt Ratio	=	Total Liabilities / Total Assets
		=	$546,000 / $1,050,000
		=	0.52
Times Interest Earned
	Times Interest Earned	=	Interest before Interest and tax or EBIT / Interest Expense
		=	$130,000 / $16,000
		=	8.125
Return of Equity
	Return of Equity	=	Net Income / Total Equity
		=	$82,000 / $504,000
		=	0.16

Thanks