Question

The balance sheet and the income statement of “Omega” Company containing data in € is as follows: Balance Sheet 20X1 Assets Fixed assets: Property, plant and equipment Less accumulated depreciation Net property, plant and equipment Total fixed assets 5,500,000 1,075,000 6,575,000 Current assets: 44EUL 3,500,000 20X1 Liabilities & Stockholders' Equity Stockholders' equity: 11,000,000 Common stock (3,925,000) Retained earnings 7,075,000 Total stockholders' equity 7,075,000 Long - term liabilities: Long-term debt 700,000 Total long-term liabilities 800.000 Current liabilities: 1,650,000 Accounts payable 2,100,000 Short-term debt 750,000 Total current liabilities 6,000,000 Total liabilities Total liabilities & stockholders' equity 13,075,000 3,500,000 Cash and cash equivalents Marketable securities Accounts receivables Inventory Prepaid expenses Total current assets 700,000 2,300,000 3,000,000 6,500,000 Total assets 13,075,000

A.
Required:
1. Please calculate the following ratios and amounts: a) working capital,
current ratio, acid-test ratio, cash to current liabilities ratio, days’ sales
in receivables (based on ending accounts receivables), days’ sales in
inventory (based on cost of goods and ending inventory), operating cycle,
total debt to equity ratio and times interest earned. For your calculations,
assume that a year amounts for 360 days

Answer 1

a). Working capital = Current assets - current liabilities = 6000000-3000000 = 3000000

b). current ratio = current asset/current liabilities = 6000000/3000000 = 2

c). acid-test ratio = (Cash and cash equivalent + marketable securities + accounts receivable)/current liabilities

= (700000+800000+1650000)/3000000 = 1.05

d). cash to current liabilities = (Cash and cash equivalent + marketable securities)/current liabilities

= (700000+800000)/3000000 = 0.50

e). Days sales outstanding = 360*account receivable/sales = 360*1650000/17499600 = 33.94 days

f). days’ sales in inventory = 360*inventory/COGS = 360*2100000/13000000 = 58.15 days

g). operating cycle = DSO + DSI = 33.94 + 58.15 = 92.1 days

h). total debt to equity ratio = total liabilities/total equity = 6500000/6575000 = 0.99

i). Time interest earned = EBIT/Interest = 900000/400000 = 2.25