Question

Exercise 3-17 Calculating ratios; Bargain Deal [LO3-8 Bargain Deal, Inc., is a leading retailer specializing in consumer electronics. A condensed income statement and balance sheet for the fiscal year ended January 30, 2016, are shown below Bargain Deal, Inc. Balance Sheet At January 30, 2016 (s in millions) Assets Current assets: Cash and cash equivalents Short-term investments Accounts receivable, net Merchandise inventories Other current assets $ 2,036 1,311 1,192 5,057 404 10,000 3,663 $13,663 Total current assets Long-term assets Total assets Liabilities and Shareholders Equity Current liabilities: $ 4,750 3,075 7,825 2,228 3,610 Accounts payable Other current liabilities Total cu rrent liabilities Long-term liabilities Shareholders' equity Total liabilities and shareholders' equity $13,663 Bargain Deal, Inc. Income Statement For the Year Ended January 30, 016 ) 3959 ($ in millions) $39,558 38,159 1,399 Revenues Costs and expenses Operating income income Other (expense)" (71) Income before income taxes 1,328 593 $ 735 Income tax expense Net income Includes $134 of interest expense Required: 1-a. Calculate the current ratio for Bargain Deal for its fiscal year ended January 30, 2016 1-b. Calculate the acid-test ratio for Bargain Deal for its fiscal year ended January 30, 2016 1-c. Calculate the debt to equity ratio for Bargain Deal for its fiscal year ended January 30, 2016 1-d. Calculate the times interest earned ratio for Bargain Deal for its fiscal year ended January 30, 2016 (For all requirements, round your answers to 2 decimal places.) 1- current ratio Acid-test ratio Debt to equity ratio 1 Times interest d. earned ratio times

Answer 1

1.a. Calculate Current ratio for BD deal for its fiscal year ended January 30,2016: Total current assets Currentratio=- Total current liabilities $10,000 $7,825 =1.28 Therefore, current ratio is 1.28. 1.b. Calculate Acid test ratio: Total current assets-Merchandise inventory Acid test ratio= Total current liabilities $10,000-$5,057 $7,825 $4,493 $7,825 =0.63 Therefore, Acid test ratio is 0.63. 1.c Calculate debt equity ratio:

Total liabilities Debt equity ratio=- Shareholders'equity $7,825+$2,228 $3,610 $10.053 $3.610 =2.78 Therefore, debt equity ratio is 2.78. 1.d. Calculate times interest earned ratio: Revenues Costs and expenses Operating income Other income ($134-$71) Income before interest and taxes Interest expense Income before income taxes $39,558 38,159 1,399 63 1,462 134 1.328 Income beforeinterest and taxes Timeinterest earnedratio=. Interest expense $1,462 $134 =10.91 Therefore, Time interest earned ratio is 10.91.