Question

1. The times interest earned ratio measures a company’s ability to
   1. maintain profit after paying interest.
   2. pay interest and debt on the due date.
   3. make interest payments out of current earnings.
   4. pay interest and debt from current assets already on hand.
2. The 2020 and 2021 partial balance sheets for Ottoman Industries are shown below.

3. The 2020and 2021 partial balance sheets for Ottoman Industries is shown below. 2020 2021 Current assets    Cash and cash equivalents $ 16,000 $ 14,000    Accounts receivable, net 20,000 24,000    Inventory 25,000 23,000    Marketable equity securities    5,000    5,000 Total current assets 66,000 66,000 Plant & equipment, net    60,000    40,000 Total assets $126,000 $106,000 Current liabilities $ 20,000 $ 30,000 Noncurrent liabilities 60,000 40,000 Total liabilities 80,000 70,000 Total stockholders’ equity    46,000    36,000 Total liabilities and stockholders’ equity $126,000 $106,000 Calculate the current ratio for 2021. 0.47 0.62 1.37 2.20 44. The 2020 and 2021 partial balance sheets for Ottoman Industries is shown below: 2020 2021 Current assets    Cash and cash equivalents $ 16,000 $ 14,000    Accounts receivable, net 20,000 24,000    Inventory 25,000 23,000    Marketable equity securities    5,000    5,000 Total current assets 66,000 66,000 Plant & equipment, net    60,000    40,000 Total assets $126,000 $106,000 Current liabilities $ 20,000 $ 30,000 Noncurrent liabilities 60,000 40,000 Total liabilities 80,000 70,000 Total stockholders’ equity    46,000    36,000 Total liabilities and stockholders’ equity $126,000 $106,000 Calculate the 2021 acid-test ratio. 1.27 1.51 1.43 2.20

   Calculate Ottoman’s working capital for 2021.

4. 1. $26,000
   2. $36,000
   3. 1.65
   4. 1.53
5. The 2020and 2021 partial balance sheets for Ottoman Industries is shown below.

6. 	2020	2021
   Current assets
   Cash and cash equivalents	$ 16,000	$ 14,000
   Accounts receivable, net	20,000	24,000
   Inventory	25,000	23,000
   Marketable equity securities	5,000	5,000
   Total current assets	66,000	66,000
   Plant & equipment, net	60,000	40,000
   Total assets	$126,000	$106,000
   Current liabilities	$ 20,000	$ 30,000
   Noncurrent liabilities	60,000	40,000
   Total liabilities	80,000	70,000
   Total stockholders’ equity	46,000	36,000
   Total liabilities and stockholders’ equity	$126,000	$106,000

Answer 1

1. Option C

2. Current ratio = Current assets/Current liabilities = 66,000/30,000 = 2.20 Option D

3. Acid test ratio = Quick assets/Current liabilities = (66,000-23,000)/30,000 = 1.43 Option C

4. Working capital = Current assets - Current Liabilities = 66,000 - 30,000 = 36,000 Option B