Question

Just Dew It Corporation reports the following balance sheet information for 2017 and 2018.

Based on the balance sheets given for Just Dew It:

a.

Calculate the current ratio for each year. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)

b.

Calculate the quick ratio for each year. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)

c.

Calculate the cash ratio for each year. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)

d.

Calculate the NWC to total assets ratio for each year. (Do not round intermediate calculations and enter your answers as a percent to 2 decimal places, e.g., 32.16.)

e.

Calculate the debt-equity ratio and equity multiplier for each year. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)

f.

Calculate the total debt ratio and long-term debt ratio for each year. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)

Just Dew It Corporation reports the following balance sheet information for 2017 and 2018 JUST DEW IT CORPORATION 2017 and 2018 Balance Sheets Assets Liabilities and Owners' Equity 2018 2018 12,157 14,105 57,204 $96,171 104,124 2017 2017 Current assets Current liabilities Cash Accounts receivable 29,382 Inventory Accounts payable Notes payable $46,382 $49,276 19,784 32,815 18,246 54,632 64,628$69,060 $49,000 45,000 Common stock and paid- 50,00o 50,000 299,784 315,894 $349,784 $365,894 Total liabilities and owners $463,412 $479,954 Total Long-term debt Owners' equity Total surplus Retained earnings Net plant and equipment 367,241 $375,830 Tota Total assets $463,412 $479,954 equity

Answer 1

2017:

Current Ratio = Current Assets / Current Liabilities
Current Ratio = $96,171 / $64,628
Current Ratio = 1.49 times

Quick Ratio = (Current Assets - Inventory) / Current Liabilities
Quick Ratio = ($96,171 - $54,632) / $64,628
Quick Ratio = 0.64 times

Cash Ratio = Cash / Current Liabilities
Cash Ratio = $12,157 / $64,628
Cash Ratio = 0.19 times

NWC Ratio = Net Working Capital / Total Assets
NWC Ratio = (Current Assets - Current Liabilities) / Total Assets
NWC Ratio = ($96,171 - $64,628) / $463,412
NWC Ratio = 0.0681 or 6.81%

Debt-Equity Ratio = Total Liabilities / Total Owners’ Equity
Debt-Equity Ratio = (Current Liabilities + Long-term Liabilities) / Total Owners’ Equity
Debt-Equity Ratio = ($64,628 + $49,000) / $349,784
Debt-Equity Ratio = 0.32 time

Equity Multiplier = 1 + Debt-Equity Ratio
Equity Multiplier = 1 + 0.32
Equity Multiplier = 1.32 times

Total Debt Ratio = Total Liabilities / Total Assets
Total Debt Ratio = (Current Liabilities + Long-term Liabilities) / Total Assets
Total Debt Ratio = ($64,628 + $49,000) / $463,412
Total Debt Ratio = 0.25 times

Long-term Debt Ratio = Long-term Liabilities / Total Assets
Long-term Debt Ratio = $49,000 / $463,412
Long-term Debt Ratio = 0.11 times

2018:

Current Ratio = Current Assets / Current Liabilities
Current Ratio = $104,124 / $69,060
Current Ratio = 1.51 times

Quick Ratio = (Current Assets - Inventory) / Current Liabilities
Quick Ratio = ($104,124 - $57,204) / $69,060
Quick Ratio = 0.68 times

Cash Ratio = Cash / Current Liabilities
Cash Ratio = $14,105 / $69,060
Cash Ratio = 0.20 times

NWC Ratio = Net Working Capital / Total Assets
NWC Ratio = (Current Assets - Current Liabilities) / Total Assets
NWC Ratio = ($104,124 - $69,060) / $479,954
NWC Ratio = 0.0731 or 7.31%

Debt-Equity Ratio = Total Liabilities / Total Owners’ Equity
Debt-Equity Ratio = (Current Liabilities + Long-term Liabilities) / Total Owners’ Equity
Debt-Equity Ratio = ($69,060 + $45,000) / $365,894
Debt-Equity Ratio = 0.31 time

Equity Multiplier = 1 + Debt-Equity Ratio
Equity Multiplier = 1 + 0.31
Equity Multiplier = 1.31 times

Total Debt Ratio = Total Liabilities / Total Assets
Total Debt Ratio = (Current Liabilities + Long-term Liabilities) / Total Assets
Total Debt Ratio = ($69,060 + $45,000) / $479,954
Total Debt Ratio = 0.24 times

Long-term Debt Ratio = Long-term Liabilities / Total Assets
Long-term Debt Ratio = $45,000 / $479,954
Long-term Debt Ratio = 0.09 times