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The 2018 balance sheet for Hallbrook Industries, Inc., is shown below. HALLBROOK

ID: 2396650 • Letter: T

Question

The 2018 balance sheet for Hallbrook Industries, Inc., is shown below.

HALLBROOK INDUSTRIES, INC. Balance Sheet December 31, 2018 ($ in 000s)

Assets

Cash $ 200

Short-term investments 150

Accounts receivable 200

Inventories 350

Property, plant, and equipment (net) 1,000

Total assets $ 1,900

Liabilities and Shareholders’ Equity

Current liabilities $ 400

Long-term liabilities 350

Paid-in capital 750

Retained earnings 400

Total liabilities and shareholders’ equity $ 1,900

The company’s 2018 income statement reported the following amounts ($ in 000s):

Net sales $ 4,600

Interest expense 40

Income tax expense 100

Net income 160

Required:

1. Calculate the current ratio.(Round your answer to 2 decimal places.)

2. Calculate the acid-test ratio. (Round your answer to 3 decimal places.)

3. Calculate the debt to equity ratio. (Round your answer to 2 decimal places.)

4. Calculate the times interest earned ratio. (Round your answer to 1 decimal place.)

1. Current ratio

2. Acid-test ratio

3. Debt to equity ratio

4. Times interest earned ratio .........times

Explanation / Answer

Cash 200 Short term investment 150 Accounts receivable 200 Inventory 350 Total current assets 900 Current liabilities 400 1 Current ratio = Current assets / current Liabilities Current ratio 2.25 2 Acid test ratio = (current assets - inventory )/ current liabilities Acid test ratio 1.38 3 Debt to equity ratio = Total liabilities / stockholders equity Total liabilities 750 (400+350) Stockholders equity 1150 (700+450) Debt equity ratio 0.65 4 Times interest charged = EBIT / interest expense EBIT = net income + income tax + interest expense Interest expense 40 EBIT 300 (160+100+40) Times interest charged 7.5 times