Question

EXERCISE - CHAPTER 19. RATIOS: From the following Information, compute the ratios indicated and place the proper number in the blanks provided. ASSETS: Cash $10,000 Marketable Securities $15,000 Accounts Receivable, Net $20,000 Inventory $30,000 Prepaid Assets $ 5,000 Property, Plant & Equipment $100,000 Total Assets: $180,000 LIABILITIES & STOCKHOLDERS' EQUITY: Current Liabilities $20,000 Long-Term Liabilities $80,000 Stockholders' Equity $80,000 Total Liabilities & Stockholder's Equity: $180,000 Sales $200,000 Cost of Goods Sold $150.000 Gross Margin $ 50,000 Operating Expense $ 30,000 Net Operating Income $ 20,000 nterest Expense $ 10.000 Net Income: $ 10.000 Other Information: Number of shares of common stock Market price of common stock Dividends per share $5.00 1,000 $ 100. Current Ratio Quick Ratio Receivable Turnover Average Days' Sales Uncollected Inventory Turnover Profit Margin Earnings Per Share Price/Earnings Ratio Debt to Equity Ratio ridend Yield

Answer 1

                                Current Assets                80000

1. Current Ratio =   ____________    =     ______ = 4 or 4:1

                              Current Liabilities              20000

Current Assets= cash + marketable securities + Accounts receivables net + inventory + prepaid expenses

                             10000+15000+20000+30000+5000 =80000

                                    Quick Assets 45000

2. Quick Ratio =   ____________    = ______ = 2.25 or 2.25:1

                                  Current Liabilities 20000

            Quick Assets    = cash + marketable securities + Accounts receivables net  

                                           10000+15000+20000= 45000

Note: Inventory and Prepaid Expenses are not form a part of Quick Assets

                                                                                                                    

                                                         Net Credit Sales 200000

3. Receivables Turnover Ratio =   ____________    =              ______    = 10 or 10:1

                                                       Average Receivables 20000

Note: In the absence of information closing receivables can be considered as average receivables

                                

                                                                            365 days                                    365

4. Average days sales uncollected ratio =   ______________________ = _______ = 36.5 days

                                                                       Receivables Turnover Ratio 10

                                                                cost of goods sold                         150000

5. Inventory Turnover Ratio = ____________ ______ = ______    = 5 or 5:1

                                                                Average Inventory                       30000

                                

Note: In the absence of opening inventory closing inventory considered as average inventory

6. Profit margin Ratio

As the question is not specific about which profit margin hence all the profit margins are calculated                    

                                                                

                                

                                                                Gross Margin                                    50000

Gross Margin Ratio =                        ____________ × 100 = ______ × 100      = 25%

                                                                Net Sales                                          200000

                                                             Operating Income                               20000

Operating Margin Ratio = ____________ × 100 = ______ × 100      = 10%

                                                                Net Sales                                          200000

                                                             net Income                                    10000

Net Margin Ratio = ____________ × 100 = ______ × 100      = 5%

                                                                Net Sales                                     200000

                                                                    Net Income                                                   10000

Earnings Per Share =                        ____________ _______                           =      ______        = 10

                                                                No of Common Shares/common stock          1000                      

                                                             Market value of share/ common stock                               100

Price Earnings Ratio =                        ____________ ______                             =                  ______       = 10

                                                               Earnings per share                                               10      

                                                            Long term Debts                                    80000

Debt equity Ratio =                        ____________         × 100 =              ______        = 1

                                                             Share holders equity                              80000

                                                                  Annual Dividend per share                      5

Dividend Yield Ratio =                        ____________ ________ =              ______        = 0.05 or 5%

                                                                Market price per share                             100         

note: best commonly used formulas are used for calculation of above ratios.