70748 1529715543400 to lts major competitors. The company\'s financial statement

Question

70748 1529715543400 to lts major competitors. The company's financial statements for the last two years are as follows Balance Sheet Current assets s 950,000 $ 1190,000 300,000 1760,000 2.400,000 200,000 Marketable securties Accounts recevable, net 2660,000 260,000 7460,000 Total current assets Plant and equipment, net 5850,000 9,040,000 Total assets $ 16,960000 $14.890,000 Liabilines Current hablines Note payable, 10% s 4,000,000 2960,000 3,060000 7660,000 6,020.000 7000000 1870.000 9300000 8.870.000 O Type here to search

Explanation / Answer

The ratios are calculated as follows:

____

Notes:

The calculations are shown as below:

Working Capital (This Year) = 7,460,000 - 4,000,000 = $3,460,000

Working Capital (Last Year) = 5,850,000 - 2,960,000 = $2,890,000

____

Current Ratio (This Year) = 7,460,000/4,000,000 = 1.87

Current Ratio (Last Year) = 5,850,000/2,960,000 = 1.98

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Acid Test Ratio (This Year) = (7,460,000 - 3,590,000- 260,000)/4,000,000 =.90

Acid Test Ratio (Last Year) = (5,850,000 - 2,400,000 - 200,000)/2,960,000 = 1.10

____

Average Collection Period (This Year) = 365/(15,850,000/((2,660,000+1,760,000)/2)) = 50.9 days

Average Collection Period (Last Year) = 365/(13,480,000/((1,760,000+1,660,000)/2)) = 46.3 days

____

Average Sale Period (This Year) = 365/(12,680,000/((3,590,000+2,400,000)/2)) = 86.2 days

Average Sale Period (Last Year) = 365/(10,110,000/((2,400,000+2,020,000)/2)) = 79.8 days

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Operating Cycle (This Year) = 50.9 + 86.2 = 137.1 days

Operating Cycle (Last Year) = 46.3 + 79.8 = 126.1 days

____

Total Asset Turnover (This Year) = 15,850,000/((16,960,000+14,890,000)/2) = 1.00

Total Asset Turnover (Last Year) = 13,480,000/((14,890,000+13,060,000)/2) = .96

This Year Last Year a. Working Capital (Total Current Assets - Total Current Liabilities 3,460,000 2,890,000 b. Current Ratio (Total Current Assets/Total Currrent Liabilities) 1.87 1.98 c. Acid Test Ratio (Total Current Assets - Inventory -Prepaid Expenses)/Total Current Liabilities 0.90 1.10 d. Average Collection Period (365/(Sales/Average Accounts Receivable)) 50.9 days 46.3 days e. Average Sale Period (365/(Cost of Goods Sold/Average Inventory)) 86.2 days 79.8 days f. Operating Cycle (Average Sale Period + Average Collection Period) 137.1 days 126.1 days g Total Asset Turnover (Sales/Average Assets) 1.00 0.96

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