Question

41. The times interest earned ratio measures a company's ability to a. maintain profit after paying interest. b. pay interest and debt on the due date. c. make interest payments out of current earnings. d. pay interest and debt from current assets already on hand. 42. The 2020 and 2021 partial balance sheets for Ottoman Industries are shown below. 2020 2021 Current assets Cash and cash equivalents Accounts receivable, net Inventory $ 16,000 $ 14,000 20,000 24,000 25,000 23,000 5,000 5,000 66,000 66,000 Marketable equity securities Total current assets Plant & equipment, net 40.000 60.000 $126.000 Total assets $106.000 Current liabilities Noncurrent liabilities Total stockholders' equity Total liabilities and stockholders' equity $ 20,000 $ 40,000 60,000 30,000 46,000 36.000 $126.000 $106.000 Calculate Ottoman's working capital for 2021. a $26,000 b. $36,000 c. 1.65 d. 1.53

Answer 1

(41) The times intrest earned ratio measures a company's ability to Ans c) Make intrert payments out of the current earnings Since, where there is a high rato of Intrest earned it is able to meet the intrest obligation with the current earnings. 42) Homan's working Capital Assets ocument liabilires Thorking capital = current For 2001 Current Assets - current liabilities & $ 66,000 $ 40,000. We = $66,000 $40,000 klorking capital = $26,000) (6) Ansuar = (a) Cument ratio = Current Assets current riabilities

t valho - Corrent vaho - $ 66,000 90,000 - 2.20 kurrent raho - 2.20 ] Ane = (d) 44) Aud test rabo - Cumentanch Invertoa current liabilities 66,000 © 23,000 80,000 43,000 1.43 30,000 | Acid Testraho = 1.43 / Ans (el 45) Average collection period. = No. of days /workry dous o Avg Receivable ho raho where Auf Reevable trato - Relevable IraboNet credit sales Augal receivable) Here Net credit sales for 2012 $ 114,000

Averede alle recevable = $2000+20000 +2400 3 i. Aug = $24000 pecivable Toraho $ 114,000 b ೩೦ತಿ 2 24000 = 4.75 rate Aug collection period = No of days Aug Recorable Torate = 365 475 (Aug collection period = 76.84 days for 2022 Answer = (d)