Question

eBook Print Item Twenty metrics of liquidity, Solvency, and Profitability The comparative financial statements of Automotive Solutions Inc. are as follows. The market price of Automotive Solutions inc. common stock was $57 on December 31, 20Y8. AUTOMOTIVE SOLUTIONS INC. Comparative Income Statement For the Years Ended December 31, 20Y8 and 20Y7 20Y8 20Y7 Sales $2,759,400 $2,542,330 Cost of goods sold (1,016,160) (934,870) Gross profit $1,743,240 $1,607,460 Selling expenses $(565,630) $(699,550) Administrative expenses (481,830) (410,840) Total operating expenses (1,047,460) (1,110,390) Operating income $695,780 $497,070 Other revenue and expense: 36,620 31,730 Other income (176,000) (96,800) Other expense (interest) $556,400 $432,000 Income before income tax (66,800) (52,000) Income tax expense $380,000 $489,600 Net income AUTOMOTIVE SOLUTIONS INC. Comparative Statement of Stockholders' Equity For the Years Ended December 31, 20Ys and 20Y7 20Y7 20Y8 Preferred Common Retained Preferred Common Retained Stock Earnings Earnings Stock Stock Stock check My Work 10 more Check My Work uses remaining AUTOMOTIVE SOLUTIONS INC. Comparative Statement of Stockholders' Equity For the Years Ended December 31, 20Y8 and 20Y7 20Y8 20Y7 Preferred Common Retained Preferred Common Retained . Stock Stock Earnings Earnings Stock Stock

Answer 1

Answer to Requirement 1.

Working Capital = Current Assets – Current Liabilities
Working Capital = $2,185,996 - $705,160
Working Capital = $1,480,836

Answer to Requirement 2.

Current Ratio = Current Assets/ Current Liabilities
Current Ratio = $2,185,996 / $705,160
Current Ratio = 3.1 : 1

Answer to Requirement 3.

Quick Ratio = (Current Assets – Inventories – Prepaid Expenses) / Current Liabilities
Quick Ratio = ($2,185,996 - $394,200 - $88,636) / $705,160
Quick Ratio = $1,703,160 / $705,160
Quick Ratio = 2.4 : 1

Answer to Requirement 4.

Accounts Receivable Turnover = Sales / Average Accounts Receivable
Average Accounts Receivable = ($525,600 + $496,400) / 2
Average Accounts Receivable = $511,000

Accounts Receivable Turnover = $2,759,400 / $511,000
Accounts Receivable Turnover = 5.4 times

Answer to Requirement 5.

Days’ sales in Receivables = 365 / Accounts Receivable Turnover
Days’ sales in Receivables = 365 / 5.4
Days’ sales in Receivables = 67.6 days