The financial statements for Castile Products, Inc., are given below: Castile Pr

Question

The financial statements for Castile Products, Inc., are given below: Castile Products, Inc Balance Sheet December 31 Assets Current assets $ 18,000 200,000 330,000 8,000 Cash Accounts receivable, net Merchandise inventory Prepaid expenses 556,000 840.000 Total current assets Property and equipment, net Total assets Liabilities and Stockholders' Equity $1,396,000 Liabilities Current liabilities Bonds payable, 10% $ 240,000 370,000 610,000 $ 130,000 Total liabilities Stockholders' equity Common stock, $10 par value Retained earnings 656,000 786,000 $1,396,000 Total stockholders' equity Total liabilities and equity Castile Products, Inc Income Statement For the Year Ended December 31 Sales Cost of goods sold $2,800,000 1,312,000 Gross margin Selling and administrative expenses 1,488,000 630,000 Net operating income Interest expense 858,000 37,000 Net income before taxes Income taxes (30%) 821,000 246,300 Net income $574,700

Explanation / Answer

Working Capital = Current assets- Current Liabilities 556000-240000 316000 Current ratio Current Assets/ Current Liabilities 556000/240000 2.317 Acid Test Ratio Current Assets- Inventory- Prepaid expenses/ Current Liabilities 556000-330000-8000/240000 218000/240000 0.908 Debt to Equity Ratio Total Debts/ Shareholders Equity 610000/130000 4.692 Times Interest Earned ratio EBIT/ Interest 858000/37000 23.18919

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