![C2 - Selected information for Smith Company are presented below. [SK3, AR2: 10 marks] December 31, 2019 December 31, 2018 Cas](http://img.homeworklib.com/questions/5f5e2270-7339-11ea-a6b1-77b8c6c93333.png?x-oss-process=image/resize,w_560)
Homework Answers
a.
Current ratio = (Cash + Investments + Receivables + Inventories) / C. Liabilities
= (100,000 + 50,000 + 250,000 + 200,000) / 250,000
= 600,000 / 250,000
= 2.4 (Answer)
b.
Acid test ratio = (Cash + Investments + Receivables) / C. Liabilities
= (100,000 + 50,000 + 250,000) / 250,000
= 400,000 / 250,000
= 1.6 (Answer)
c.
AR turnover = Net Sales (assuming credit) / Average AR
= 2,500,000 / {(250,000 + 225,000) / 2}
= 2,500,000 / 237,500
= 10.53 (Answer)
d.
Profit margin = (Net income / NetSales) × 100
= (850,000 / 2,500,000) × 100
= 34% (Answer)
e.
Inventory turnover = Cost of GoodsSold / Average In
= 2,000,000 / {(200,000 + 150,000) / 2}
= 2,000,000 / (350,000/2)
= 2,000,000 / 175,000
= 11.43 (Answer)
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