Question

Pronghorn Company’s condensed financial statements provide the following information.

PRONGHORN COMPANY BALANCE SHEET
		Dec. 31, 2017			Dec. 31, 2016
Cash		$ 52,400			$ 60,600
Accounts receivable (net)		197,600			79,200
Short-term investments		79,200			40,000
Inventory		437,500			361,900
Prepaid expenses		3,000			7,000
Total current assets		$ 769,700			$ 548,700
Property, plant, and equipment (net)		854,600			858,900
Total assets		$1,624,300			$1,407,600
Current liabilities		233,500			167,200
Bonds payable		404,000			404,000
Common stockholders’ equity		986,800			836,400
Total liabilities and stockholders’ equity		$1,624,300			$1,407,600

INCOME STATEMENT FOR THE YEAR ENDED 2017
Sales		$1,649,400
Cost of goods sold		(799,700)
Gross profit		849,700
Selling and administrative expenses		(444,100)
Interest expense		(39,600)
Net income		$ 366,000

Determine the following for 2017. (Round answers to 2 decimal places, e.g. 1.59 or 45.87%.)

(1)		Current ratio at December 31
(2)		Acid-test ratio at December 31
(3)		Accounts receivable turnover
(4)		Inventory turnover
(5)		Return on assets
(6)		Profit margin on sales

Answer 1

Answer-

1)- Current Ratio=Current Assets/ Current Liabilities

= $769700/$233500

= 3.30 times

2)- Acid-test (Quick ratio):- Current assets-Inventory-Prepaid expenses/Current Liabilities

= ($769700-$437500-$3000)/$233500

= $329200/$233500

= 1.41 times

3)- Accounts receivable turnover ratio = Net credit sales/Average accounts receivable

= $1649400/($79200+$197600)/2

= $1649400/$138400

= 11.92 times

4)- Inventory turnover ratio= Cost of goods sold/Average inventory

= $799700/($361900+$437500)/2

= $799700/$399700

= 2.00 times

5)- Return on assets =(Net income/Average total assets)*100

= {($366000/($1407600+$1624300)/2}*100

= ($366000/$1515950)*100

= 24.14%

6)- Profit margin on sales = (Net income/Sales)*100

= ($366000/$1649400)*100

= 22.19%