Question

The financial statements for Tyler​ Toys, Inc. are shown in the popup​ window:  

Calculate the current​ ratio, quick​ ratio, and cash ratio for Tyler Toys for 2013 and 2014. Should any of these ratios or the change in a ratio warrant concern for the managers of Tyler Toys or the​ shareholders?

What is the current ratio for​ 2014? ​(Round to four decimal​ places.)

Tyler Toys, Inc. Income Statement for Years Ending December 31, 2013 and 2014 2014 2013 Revenue $ 14,146,734 $ 13,567,792 Cost of goods sold $ -8,448,203 $ -8,131,696 Selling, general, and administrative expenses $ -997,047 $ -980,258 Depreciation $ 1,497,374 $ -1,471,905 $ 3,204.110 $ 2,983,933 Interest expense $ -376,305 $ -354,739 Taxes $ -1,074,566 $ -999,094 Net Income $ 1,753,239 $ 1,630,100 Right click on the table and select Copy to Clipboard and then right-click the highlighted texts in the popup dialogue box and select Copy in order to paste its contents into a spreadsheet. EBIT Tyler Toys, Inc. Balance Sheet as of December 31, 2013 and 2014 ASSETS 2014 2013 LIABILITIES 2014 2013 Current assets Current liabilities Cash 190,476 $ 187,536 Accounts payable $ 1,545,049 $ 1,455,401 Investments 180,470 $ 121,759 Short-term debt $ 312,318 $ 333,569 Accounts receivable 668,143 $ 630,847 Total current liabilities $ 1,857,367 $ 1,788,970 Inventory 588,200 $ 564,433 Long-term liabilities Total current assets $ 1,627,289 $ 1,504,575 Debt $ 7,285,451 $ 6,604,745 Long-term assets Other liabilities 1,462,493 $ 1,346,428 Investments $ 3,053,671 $ 2,827,830 Total liabilities $ 10,605,311 $ 9,740,143) Plant, property, and equipment $ 8,496,847 $ 8,480,064 OWNERS' EQUITY Goodwill 347,970 $ 346,031 Common stock $ 1,458,913 $ 1,454,679 Intangible assets $ 1,158,960 $ 957,654 Retained earnings $ 2,620,513 $ 2,921,332 Total owners' equity $ 4,079,426 $ 4,376,011 TOTAL LIABILITIES TOTAL ASSETS $ 14,684,737 $ 14,116,154 AND OWNERS' EQUITY $ 14,684,737 $ 14,116,154 Right click on the table and select Copy to clipboard and then right-click the highlighted texts in the popup dialogue box and select Copy in order to paste its contents into a spreadsheet.

Answer 1

a). Current ratio = Current Assets/Current Liabilities

for 2013 = 1504,575/1788,970 ;= 0.8410

for 2014 = 1627,289/1857,367 ;= 0.8761

b). Quick ratio = (Current Assets- Inventory)/Current Liabilities

for 2013 = (1504,575-564,433)/1788,970 ;= 0.5255

for 2014 = (1627,289-588,200)/1857,367 ;= 0.5594

c). Cash Ratio = Cash/ Current Liabilities

for 2013 = 187,536/1788,970 ;= 0.1048

for 2014 = 190,476/1857,367 ;= 0.1026

-- The current ratio for​ 2014 is 0.8761

The Current ratio of Tyler Toys is a concern for the company as it does not have sufficient Current Assets to pay off Current Laibilities. The Ideal current ratio is 2 but the company has Current Ratio of below 1 for both years which is a serious concern for running its day-to-day business activities. The Company needs a drastic change in Current Ratio in future years.

Further its Quick ratio or Cash ratio is even less than what is ideally required. So, the company needs to work on its working Capital Structure to improve day-to-day business efficiency.

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Answer 2

Calculate the current ratio, quick ratio, and cash ratio for Tyler Toys for 2010 and 2011. Should any of these ratios or the change in a ratio warrant concern for the managers of Tyler Toys or the shareholders?