Exercise 13-17 Swifty Company has been operating for several years, and on Decem

Question

Exercise 13-17

Swifty Company has been operating for several years, and on December 31, 2017, presented the following balance sheet.

SWIFTY COMPANY
BALANCE SHEET
DECEMBER 31, 2017

The net income for 2017 was $26,900. Assume that total assets are the same in 2016 and 2017.

Compute each of the following ratios. (Round answers to 2 decimal places, e.g. 1.59 or 45.87%.)

SWIFTY COMPANY
BALANCE SHEET
DECEMBER 31, 2017

Cash $38,300 Accounts payable $83,000 Receivables 67,900 Mortgage payable 126,300 Inventory 88,200 Common stock ($1 par) 143,900 Plant assets (net) 201,100 Retained earnings 42,300 $395,500 $395,500

Explanation / Answer

Total current assets = 38300+67900+88200 = 194400

a) Current ratio = 194400/83000 = 2.34

b) Acid test ratio = (194400-88200)/83000 = 1.28

c) Debt to assets ratio = (83000+126300)*100/395500 = 52.92%

d) Return on assets ratio = 26900*100/395500 = 6.80%

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