Question

Q1. Hill Roy Corporation has asked the accounts department to determine whether the company's ability to pay its current liabilities and long-term debts improved or deteriorated during current year. To answer this question, compute the following ratios for 2014 and 2013 year. I a. Current ratio b. Quick (acid-test) ratio c. Debt ratio d. Times-interest-earned ratio e. 2013 $ 47,000 Cash Short-term investments Net receivables Inventory Prepaid expenses Total assets Total current liabilities Long-term debt. Income from operations Interest expense. 2014 $ 61,000 28,000 142.000 286,000 11.000 643,000 255,000 46,000 165,000 40,000 116,000 263,000 9.000 489.000 221.000 52,000 158,000 39,000 Prepare a small report based on your analysis of the following financial statement data in a written report format. Ans. A) current ratio

Answer 1

The answer has been presented in the supporting sheet. For detailed answer refer to the supporting sheet.

Answer 2 5 Particulars Current Ratio 2014 2013 1.97 ((47000+116000+263000+9000)/ 221000) 5 Acid Test Ratio 2.07 ((61000+28000+142000+286000+11000)/25 5000) 0.905882353 ((61000+28000+142000)/255000) 0.468118196 ((255000+46000)/643000) 0.74 ((47000+116000)/221000) 0.56 ((221000+52000)/489000) Debt Ratio Times Interest Earned Ratio 4.125 4.05 0 1 (165000/40000) (158000/39000) 2 3 Note 4 Current Ratio = Current Assets / Current Liabilities 5 Acid Test Ratio = (cash + short term investments + account receivable) / current Liabilities 6 Debt Ratio - Total Liabilities/Total Assets 7 Times Interest Earned Ratio = Income from operations / interest Expense 8 The position of the corporation has improved, as the all the ratios of the company has improved, as current ratio and acid test ratio has improved and debt ratio and times interest earned ratio has also improved