Question

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Cullumber Medical manufactures hospital beds and other institutional furniture. The company's comparative balance sheet and income statement for 2015 and 2016 follow. Cullumber Medical Comparative Balance Sheet As of December 31 2016 2015 Assets Current assets Cash $400,000 $417,500 Accounts receivable, net 1,056,000 776,400 Inventory 721,000 681,050 Other current assets 381,300 247,050 Total current assets 2,558,300 2,122,000 Property, plant, & equipment, net 8,710,235 8,439,930 Total assets $11,268,535 $10,561,930 Liabilities and Stockholders' Equity Current liabilities $3,208,000 3,702,700 $2,846,000 3,892,650 Long-term debt Total liabilities 6,910,700 6,738,650 Preferred stock, $5 par value 59,000 58,900 Common stock, $0.25 par value 104,700 103,900 Retained earnings 4,194,135 3,660,480 Total stockholders' equity 4,357,835 3,823,280 Total liabilities and stockholders' equity $11,268,535 $10,561,930

Answer 1

a) Working capital = Total current assets - Total current liabilities Working capital = (2558300-3208000) Working capital = - $ 649,700/. b) Current Ratio = Total current assets/Total current liabilities Current Ratio = (2558300/3208000) Current Ratio = 0.7975 Times Current Ratio = 0.80 Times c) Acid test ratio = (Total current assets - Inventory)/Total current liabilities Acid test ratio = (2558300-721000)/3208000 Acid test ratio = 0.5727 Times Acid test ratio = 0.57 Times %3D d) Accounts receivable turnover (Net credit sales/Average accounts receivable) Average accounts receivable = (1056000+776400)/2 Average accounts receivable = $ 916,200/. Accounts receivable turnover = (10177300/916200) Accounts receivable turnover = 11.11 Times