Balance Sheet Measures of Liquidity and Credit Risk
A recent balance sheet of Sweet Tooth, Inc., included the following items, among others. (Dollar amounts are stated in thousands.)
Cash | $ 50,230 |
Marketable securities (short-term) | 55,926 |
Accounts receivable | 23,553 |
Inventories | 32,210 |
Prepaid expenses | 5,736 |
Retained earnings | 121,477 |
Notes payable to banks (due within one year) | 20,000 |
Accounts payable | 5,912 |
Dividends payable | 1,560 |
Accrued liabilities (short-term) | 21,532 |
Income taxes payable | 6,438 |
The company also reported total assets of $353,816 thousand, total liabilities of $81,630 thousand, and a return on total assets of 18.1 percent.
Instructions
a. Compute Sweet Tooth’s ( 1 ) quick assets, ( 2 ) current assets, and ( 3 ) current liabilities.
b. Compute Sweet Tooth’s ( 1 ) quick ratio, ( 2 ) current ratio, ( 3 ) working capital, and ( 4 ) debt ratio. (Round to one decimal place.)
c. Discuss the company’s liquidity from the viewpoints of (1) short-term creditors, (2) long-term creditors, and (3) stockholders.
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