Smith Co (in $ millions) Williams Co (in $ millions) Sales $13,800 $7,500 Cost of goods...
Smith Co
(in $ millions) Williams Co
(in $ millions)
|
Sales |
$13,800 |
$7,500 |
|
Cost of goods sold |
10,600 |
5,400 |
|
Cash |
30,000 |
3,600 |
|
Marketable securities |
500 |
100 |
|
Accounts receivable |
35,000 |
6,500 |
|
All other current assets |
50,000 |
8,500 |
|
Total current liabilities |
65,000 |
25,000 |
|
Total liabilities |
236,000 |
15,100 |
|
Total equity |
75,000 |
22,000 |
|
Pre-tax income |
3,900 |
6,200 |
|
Interest expense |
1,800 |
100 |
|
Average accounts receivable |
345 |
50 |
|
Average inventory |
2,525 |
900 |
|
Average total assets |
6,200 |
2,500 |
(Smith Co. is Column A, Williams Co. is Column B)
Given the information above, please calculate:
A.) Quick ratio for both companies
B.) The times interest earned for both companies
C.) The accounts receivable turnover
D.) The inventory turnover
E.) The asset turnover
Homework Answers
| Ans. A | Quick ratio = (Cash + Marketable securities + Accounts receivable) / Total current liabilities | |||
| Smith Co. | (30,000 + $500 + $35,000) / $65,000 | 1.01 : 1 | ||
| Williams Co. | ($3,600 + $100 + $6,500) / $25,000 | 0.41 : 1 | ||
| Ans. B | Time interest earned = (Pre tax income + Interest expenses) / Interest expenses | |||
| Smith Co. | ($3,900 + $1,800) / $1,800 | 3.17 | times | |
| Williams Co. | ($6,200 + $100) / $100 | 63.00 | times | |
| Ans. C | Accounts receivable turnover ratio = Net sales / Average accounts receivable | |||
| Smith Co. | $13,800 / $345 | 40.00 | times | |
| Williams Co. | $7,500 / $50 | 150.00 | times | |
| Ans. D | Inventory turnover = Cost of goods sold / Average inventory | |||
| Smith Co. | $10,600 / $2,525 | 4.20 | times | |
| Williams Co. | $5,400 / $900 | 6.00 | times | |
| Ans. E | Asset turnover = Net sales / Average assets | |||
| Smith Co. | $13,800 / $6,200 | 2.23 | times | |
| Williams Co. | $7,500 / $2,500 | 3.00 | times | |
Add Answer to:
Smith Co
(in $ millions) Williams Co
(in $ millions)
Sales
$13,800
$7,500
Cost of goods...
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