Question

Use the following financial statements for Lake of Egypt Marina, Inc. 2018 2017 LAKE OF EGYPT MARINA, INC. Balance Sheet as of December 31, 2018 and 2017 (in millions of dollars) 2018 2017 Liabilities and Equity Current liabilities: $ 50 $ 56 Accrued wages and taxes 60 52 Accounts payable 205 Notes payable $315 $204 Total $ 48 $ 50 55 Assets Current assets: Cash and marketable securities Accounts receivable Inventory Total Fixed assets: Gross plant and equipment Less: Depreciation 44 40 $165 $132 $136 $250 $232 60 90 $160 Net plant and equipment Other long-term assets $172 24 $196 Stockholders' equity: Preferred stock (4 million shares) Common stock and paid-in surplus (24 million shares) Retained earnings Total Total liabilities and equity 265 24 104 $132 $400 $185 293 $500 Total assets $500 LAKE OF EGYPT MARINA, INC. Income Statement for Years Ending December 31, 2018 and 2017 (in millions of dollars) 2018 Net sales (all credit) $ 600 Less: Cost of goods sold 216 Gross profits $ 384 Less: Other operating expenses Earnings before interest, taxes, depreciation, and $ 2017 400 120 280 24 36

Answer 1

Answer a.

Current Ratio = Current Assets / Current Liabilities
Current Ratio = $315 / $165
Current Ratio = 1.91 times

Answer b.

Quick Ratio = (Current Assets - Inventory) / Current Liabilities
Quick Ratio = ($315 - $205) / $165
Quick Ratio = 0.67 times

Answer c.

Cash Ratio = Cash and Marketable Securities / Current Liabilities
Cash Ratio = $50 / $165
Cash Ratio = 0.30 times

Answer d.

Inventory Turnover = Net Sales / Inventory
Inventory Turnover = $600 / $205
Inventory Turnover = 2.93 times

Answer e.

Days’ Sales in Inventory = 365 * Inventory / Net Sales
Days’ Sales in Inventory = 365 * $205 / $600
Days’ Sales in Inventory = 124.71 days

Answer f.

Average Collection Period = 365 * Accounts Receivable / Net Sales
Average Collection Period = 365 * $60 / $600
Average Collection Period = 36.50 days

Answer g.

Average Payment Period = 365 * Accounts Payable / Net Sales
Average Payment Period = 365 * $55 / $600
Average Payment Period = 33.46 days

Answer h.

Fixed Asset Turnover = Net Sales / Net Fixed Assets
Fixed Asset Turnover = $600 / $160
Fixed Asset Turnover = 3.75 times