Question

Cell Styles Office Update To keep up-to-date with security updates, fixes, and impro... Che C37 Income Stmt info: less Cost of Goods Sold: Gross Profit Operating Expenses Earnings before Interest & Taxes Interest exp earnings before Taxes Taxes Sales 1,000,000$ 1,100,000 424,000 676,000 65,750 310,250 25,500 284,750 600,000 350,000 250,000 25,000 12 225,000 13 Net Income 135,000$ 170,850 15 16 17 18 19 Inventory 20 Total Current Assets 21 Fixed Assets (Net) 22 Total Assets Balance Sheet info Cash Accounts Receivable 12/31/17 12/31/18 25,000 S 50,000 125,000 s 200,000 s 212,250 30,000 51,000 131,250 300,000 315,000 500,000 110,000 S 290,000$ 500,000 527,250 Current Liabilities 121,000 $ 180,000188,000 309,000 218,250 527,250 25 Long Term Liabilities Total Liabilities 27 Stockholder's Equity 28 Total Liab & Equity: 29 s 210,000 31 Compute each of the following ratios for 2017 and 2018 and indicate whether each ratio was eetting "hetter"l or "worse" from 2017 to 2018 Sheet1 Sheet2 Sheet3+ Ready 凹回

Answer 1

Below are the ratios required to be calculated. In the formula mentioned with the Ratio's name, I have used the terms from the given Income statement and Balance Sheet, so that it's easy for you to recalculate and understand how I arrived at these numbers.

RATIOS	2017	2018	Getting better or getting worse?	2018 Industry Average	"good" or "bad" compared to the industry average	Notes
Profit Margin = Net Income / Sales	0.14	0.16	Better	0.11	Good
Current Ratio = Current Assets / Current Liabilities	1.82	1.75	Worse	1.90	Bad
Quick Ratio = (Current Assets - Inventory) / Current Liabilities	0.68	0.67	Worse	0.66	Good
Return on Assets = Net Income / Total Assets	0.27	0.32	Better	0.28	Good
Debt to Assets = Long Term Liabilities / Total Assets	0.36	0.36	Constant	0.50	Good	Good, as less assets are funded using debt. So less interest payments, better profitability.
Receivables Turnover Ratio = Sales / Accounts Receivable	20	21.57	Better	18.00	Good	Assuming that all Sales are Credit Sales
Avg. collection period = (Accounts receivable / Sales)*360	18	16.69	Better	15.50	Bad	Ratio is in 'days'
Inventory Turnover Ratio = Cost of goods sold / Inventory	3.20	3.23	Better	9.25	Bad	Please check the formula again from your text. I am using the formula which is used widely
Return on Equity = Net Income / Stockholders' Equity	0.64	0.78	Better	0.55	Good
Times Interest earned = Earnings before Interest and Taxes / Interest Exp	10.00	12.17	Better	11.15	Good