Calculate profitability and liquidity measures [LO 3, 4, 6] Presented here are t

Question

Calculate profitability and liquidity measures [LO 3, 4, 6]

Presented here are the comparative balance sheets of Hames, Inc., at December 31, 2011 and 2010. Sales for the year ended December 31, 2011, totaled $590,000.

$202,000

$190,000

$312,000

$280,000

20,000

18,000

$124,800

$140,000

$ 74,000

$ 59,000

$113,200

$81,000

$187,200

$140,000

$312,000

$280,000

Calculate ROE for 2011. (Round your percentage answer to one decimal place. Omit the "%" sign in your response.)

Calculate working capital at December 31, 2011. (Round your answer to the nearest whole number. Omit the "$" sign in your response.)

Calculate the current ratio at December 31, 2011. (Round your answer to two decimal places.)

Calculate the acid-test ratio at December 31, 2011. (Round your answer to two decimal places.)

Presented here are the comparative balance sheets of Hames, Inc., at December 31, 2011 and 2010. Sales for the year ended December 31, 2011, totaled $590,000.

Explanation / Answer

Hi,

Please find the answers as follows:

ROI = EBIT/Average Total Assets = (25200 + 20000)/(312000 + 280000)*100 = 15.27%

ROE = Net Income/Average Stockholder's Equity = (25200 + 20000)/(187200 + 140000)/2*100 = 27.62%

Working Capital = Current Assets - Current Liabilties = 202000 - 102800 = 99200

Current Ratio = Current Assets/Current Liabilties = 202000/102800 = 1.96

Acid Test Ratio = Quick Assets/Current Liabilities = (202000 - 103000)/102800 = .96

Thanks.

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