Compute the following financial data for short-term creditors for this year: Com

Question

Compute the following financial data for short-term creditors for this year:

Comparative financial statements for Heritage Antiquing Services for the fiscal year ending December 31 appear on the following page. The company did not issue any new common or preferred stock during the year. A total of 600 thousand 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 $1.00. The market value of the company’s common stock at the end of the year was $22. All of the company’s sales are on account.

Exercise 15-3 Financlal Ratios for Shont-Term Creditors LOS Creditors [LO3] Comparative financial statements for Heritage Antiquing Services for the fiscal year ending December 31 appear on the following page. The company did not issue any new common or preferred stock during the year. A total of 600 thousand 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 $1.00. The market value of the company's common stock at the end of the year was $22. All of the company's sales are on account.

Explanation / Answer

1.     Working Capital                    =Current Assets- Current Liabilities

                                                = $23910-$20230

                                                =$3680   

2.     Current Ratio                         = Current Assets/Current Liabilities

                                                = $23910/$20230

                                                = 1.18

                   

3.     Acid Test Ratio                      = (Current Assets-Inventory)/Current Liabilities                

                                                                = ($23910-$13000)/$20230

                                                                = .54

4.     Accounts Receivable Turnover=Net Annual Credit Sales/Beginning Accounts Receivable +Ending Accounts receivable/2                                                    = $76950/($9100+$7100)/2

                                                                = 9.5

5.     Average Collection Period = Average Accounts Receivables/ Annual sales/365       

                                                                = (($9100+$7100)/2)/ $76950/365

                                                                = $8100/210.8219

                                                                = 38.42 days

6.     Inventory Turnover                               = Cost of Goods Sold/ Average Inventory

                                                = $41745/(13000+12300)/2

                                                = 3.3

7.     Average Sale Period             =   365 days/ inventory Turnover

                                                = 365 Days/3.3

                                                = 110.61 days

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