From the balance sheet: Cash....................................................

Question

From the balance sheet:    Cash.............................................................$       30,000    Accountsreceivable.......................................         150,000    Inventory.......................................................         200,000    Plant assets(net of acc.deprec.).....................         500,000    Currentliabilities............................................          150,000    Total stockholdersequity.................................        300,000    Totalassets.....................................................      1,000,000 From the income statement:    netsales.............................................................. $ 1,500,000    Cost of goodssold.................................................  1,080,000    Operatingexpenses................................................     315,000    interestexpense.........................................................    84,000    income taxexpense....................................................      6,000    Netincome.............................................................       15,000 From the statement of cash flows:    Net cash provided byoperating...............................      $ 40,000 (including interest paid of $79,000)    net cash used in investingactivities.............................        (46,000)    Financing activities:       Amountsborrowed..............................$ 50,000       repayment of amountsborrowed............ (14,000)       Dividendspaid........................................(20,000)          Net cashprovided by financing activities.......................16,000    Net increase in cash during theyear.................................... $10,000 Compute the current ratio, quick ratio, working ratio and debtratio rounded to one decimal point.     From the balance sheet:    Cash.............................................................$       30,000    Accountsreceivable.......................................         150,000    Inventory.......................................................         200,000    Plant assets(net of acc.deprec.).....................         500,000    Currentliabilities............................................          150,000    Total stockholdersequity.................................        300,000    Totalassets.....................................................      1,000,000 From the income statement:    netsales.............................................................. $ 1,500,000    Cost of goodssold.................................................  1,080,000    Operatingexpenses................................................     315,000    interestexpense.........................................................    84,000    income taxexpense....................................................      6,000    Netincome.............................................................       15,000 From the statement of cash flows:    Net cash provided byoperating...............................      $ 40,000 (including interest paid of $79,000)    net cash used in investingactivities.............................        (46,000)    Financing activities:       Amountsborrowed..............................$ 50,000       repayment of amountsborrowed............ (14,000)       Dividendspaid........................................(20,000)          Net cashprovided by financing activities.......................16,000    Net increase in cash during theyear.................................... $10,000 Compute the current ratio, quick ratio, working ratio and debtratio rounded to one decimal point.    

Explanation / Answer

Current Ratio = [CurrentAssets / Current Liabilities] Current Assets = [Cash + Accounts receivable +Inventory] Current Assets = [$30,000 + $150,000 +$200,000] Current Liabilities = $150,000 Current Ratio = [$380,000 / $150,000] Current Ratio = 2.53times Quick Ratio = [(Current Assets -Inventory) / Current Liabilities] Quick Ratio = [($380,000 - $200,000) /$150,000] Quick Ratio = 1.2times Working Ratio = [{Total Annual Expenses- (Depreciation + Debt Expenses)} / Annual GrossIncome] Working Ratio = [($1,080,000 - Depreciation +$315,000) / ($1,500,000 - $1,080,000 - $315,000)] Working Ratio = [($1,080,000+ $315,000) /($1,500,000 - $1,080,000 - $315,000)] Working Ratio = [$1,395,000 / $105,000] Working Ratio = 13.29 Debt Ratio = [Total Debt / TotalAssets] Total Debt = [(Total Assets - Current Liabilities -Total Stockholder's equity) ] Total Debt = [($1,000,000 - $150,000 -$300,000)] Total Debt = $550,000 Debt Ratio = [$550,000 / $1,000,000] Debt Ratio = 0.55 Current Ratio = [CurrentAssets / Current Liabilities] Current Assets = [Cash + Accounts receivable +Inventory] Current Assets = [$30,000 + $150,000 +$200,000] Current Liabilities = $150,000 Current Ratio = [$380,000 / $150,000] Current Ratio = 2.53times Quick Ratio = [(Current Assets -Inventory) / Current Liabilities] Quick Ratio = [($380,000 - $200,000) /$150,000] Quick Ratio = 1.2times Working Ratio = [{Total Annual Expenses- (Depreciation + Debt Expenses)} / Annual GrossIncome] Working Ratio = [($1,080,000 - Depreciation +$315,000) / ($1,500,000 - $1,080,000 - $315,000)] Working Ratio = [($1,080,000+ $315,000) /($1,500,000 - $1,080,000 - $315,000)] Working Ratio = [$1,395,000 / $105,000] Working Ratio = 13.29 Debt Ratio = [Total Debt / TotalAssets] Total Debt = [(Total Assets - Current Liabilities -Total Stockholder's equity) ] Total Debt = [($1,000,000 - $150,000 -$300,000)] Total Debt = $550,000 Debt Ratio = [$550,000 / $1,000,000] Debt Ratio = 0.55

Related Questions

Navigate

• Browse (All)
• Browse F
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.