Question

Bethesda Mining Company reports the following balance sheet information for 2018 and 2019.

BETHESDA MINING COMPANY Balance Sheets as of December 31, 2018 and 2019
		2018			2019				2018			2019
Assets							Liabilities and Owners’ Equity
Current assets							Current liabilities
Cash	$	55,526		$	70,205		Accounts payable	$	188,922		$	196,611
Accounts receivable		63,281			83,639		Notes payable		84,020			135,588
Inventory		121,382			186,805
							Total	$	272,942		$	332,199
Total	$	240,189		$	340,649
							Long-term debt	$	235,000		$	171,750
							Owners’ equity
							Common stock and paid-in surplus	$	220,000		$	220,000
							Accumulated retained earnings		170,594			206,478
Fixed assets
Net plant and equipment	$	658,347		$	589,778		Total	$	390,594		$	426,478
Total assets	$	898,536		$	930,427		Total liabilities and owners’ equity	$	898,536		$	930,427

Calculate the following financial ratios for each year:  a.Current ratio. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)b.Quick ratio. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)c.Cash ratio. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)d.Debt-equity ratio and equity multiplier. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)e.Total debt ratio. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)

	a. 2018 current ratio times 2019 current ratio times b. 2018 Quick ratio times 2019 Quick ratio times c. 2018 Cash ratio times 2019 Cash ratio times d. 2018 Debt-equity ratio times 2018 Equity multiplier times 2019 Debt-equity ratio times 2019 Equity multiplier times e 2018 Total debt ratio times 2019 Total debt ratio times

Answer 1

Part a)

The current ratio is calculated as below:

Current Ratio = Total Current Assets/Total Current Liabilities

Using the values provided in the question, we get,

2018 Current Ratio = 240,189/272,942 = .88 times

2019 Current Ratio = 340,649/332,199 = 1.03 times

______

Part b)

The value of quick ratio for each year is arrived as follows:

Quick Ratio = (Total Current Assets - Inventory)/Total Current Liabilities

Using the values provided in the question, we get,

2018 Quick Ratio = (240,189-121,382)/272,942 = .44 times

2019 Quick Ratio = (340,649-186,805)/332,199 = .46 times

______

Part c)

The value of cash ratio for each year is determined as below:

Cash Ratio = Cash/Current Liabilities

Using the values provided in the question, we get,

2018 Cash Ratio = 55,526/272,942 = .20 times

2019 Cash Ratio = 70,205/332,199 = .21 times

______

Part d)

The value of debt-equity ratio and equity multiplier for each year is calculated as follows:

Debt-Equity Ratio = Total Debt/Total Equity

Equity Multiplier = 1+ Debt-Equity Ratio

Using the values provided in the question, we get,

2018 Debt-Equity Ratio = (272,942+235,000)/390,594 = 1.30 times

2018 Equity Multiplier = 1.30+1 = 2.30 times

2019 Debt-Equity Ratio = (332,199+171,750)/426,478 = 1.18 times

2019 Equity Multiplier = 1.18+1 = 2.18 times

______

Part e)

The value of total debt ratio for each year is calculated as below:

Total Debt Ratio = Total Debt/Total Assets

Using the values provided in the question, we get,

2018 Total Debt Ratio = (272,942+235,000)/898,536 = .57 times

2019 Total Debt Ratio = (332,199+171,750)/930,427 = .54 times

______

Tabular Representation:

a.	2018 Current ratio	0.88	times
	2019 Current ratio	1.03	times
b.	2018 Quick ratio	0.44	times
	2019 Quick ratio	0.46	times
c.	2018 Cash ratio	0.20	times
	2019 Cash ratio	0.21	times
d.	2018 Debt-equity ratio	1.30	times
	2018 Equity multiplier	2.30	times
	2019 Debt-equity ratio	1.18	times
	2019 Equity multiplier	2.18	times
e	2018 Total Debt ratio	0.57	times
	2019 Total Debt ratio	0.54	times