Question

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 $390,000 $417,500 Accounts receivable, net 1,038,000 776,450 Inventory 746,000 681,100 Other current assets 381,350 247,050 Total current assets 2,555,350 2,122,100 Property, plant, & equipment, net 8,702,200 8,439,880 $11,257,550 $10,561,980 Total assets Liabilities and Stockholders' Equity Current liabilities $2,846,100 $3,196,000 3,702,700 Long-term debt 3,892,600

Answer 1

	a	Working capital
		Working capital=Current asset- current liabilities
		working capital=	2,555,350-3,196,000
		working capital=	(640,650)
		Current asset	2,555,350
		Current liabilities	3,196,000
	b	Current ratio
		Current ratio=	Current asset
			Current liabilities
		Current ratio=	2,555,350
			3,196,000
		Current ratio=	0.7995
	c	Acid Test ratio
		It is assumed that other assets are other than the marketable securities
		Acid Test ratio=	Cash+Accounst receivable+marketable securities
			Current liabilities
		Acid Test ratio=	390,000+1,038,000
			3,196,000
		Acid Test ratio=	1,428,000
			3,196,000
		Acid Test ratio=	0.447
	d	Accounts receivable Turnover
		Accounts receivable Turnover=	Credit sales
			Average Accounts receivable
		Accounts receivable Turnover=	10,177,200
			907,225
		Accounts receivable Turnover=	11.22
		Average Accounts receivable=	Opening accounts receivable+closing accounts Receivable/2
		Average Accounts receivable=	=776,450+1,038,000/2
		Average Accounts receivable=	907,225
	e	Average collection period
		Average collection period=	365
			Accounts receivable Turnover
		Average collection period=	365
			11.22
		Average collection period=	32.54
	f	Inventory Turnover
		Inventory Turnover=	Cost of goods sold
			Average inventory
		Inventory Turnover=	5,611,600
			713,550
		Inventory Turnover=	7.86434027
		Average inventory=	(Opening inventory+closing inventory)/2
		Average inventory=	(681,100+746,000)/2
		Average inventory=	713,550