Return on equity. (Round your percentage answer to 1 decimal place (i.e., 0.1234

Question

Return on equity. (Round your percentage answer to 1 decimal place (i.e., 0.1234 should be entered as 12.3).)

Norsk Optronics, ALS, of Bergen, Norway, had a current ratio of 4 on June 30 of the current year. On that date, the company’s assets were:

What was the company’s working capital on June 30?

What was the company’s acid-test ratio on June 30? (Round your answer to 2 decimal places.)

The company paid an account payable of $44,000 immediately after June 30.

Comparative financial statements for Weller Corporation, a merchandising company, for the fiscal year ending December 31 appear below. The company did not issue any new common stock during the year. A total of 500,000 shares of common stock were outstanding. The interest rate on the bond payable was 10%, the income tax rate was 40%, and the dividend per share of common stock was $1.25 last year and $0.90 this year. The market value of the company’s common stock at the end of the year was $28. All of the company’s sales are on account.

Return on equity. (Round your percentage answer to 1 decimal place (i.e., 0.1234 should be entered as 12.3).)

Explanation / Answer

1. Current ratio = Current Assets / Current Liabilities

4 = 1196000 / Current Liabilities

Current Liabilities = 1196000 / 4 = $299000

Working Capital = Current Assets - Current Liabilities

= 1196000 - 299000 = $897000

# Current Assets = $77000 + $440000 + $670000 + $9000 = $1196000

2. Acid Test Ratio = Current Assets - Inventory / Current Liabilities

= 1196000 - 670000 / 299000 = 1.76

3. The company paid an account payable of $44,000 immediately after June 30. This will reduce current liabilities.

a. Working capital would increase.

b. Current ratio would increase.

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