QUESTION S (15 POINTS) The financial statements of Victor\'s Foods include the f

Question

QUESTION S (15 POINTS) The financial statements of Victor's Foods include the following items: CURRENT YEAR PREDEDING YEAR BALANCE SHEET: Cash Short-term investments Accounts receivable Merchandise inventory Prepaid expenses Total Current Assets Total Current Liabilities Total Owners Equity $21,000 18,000 11,500 000 14,000 109,500 90,000 10,500 s30,000 28,000 16,000 42,000 11,000 127,000 99,000 28,000 45, There are no long term assets or non-current liabilities. INCOME STATEMENT: Net Sales Cost of Goods Sold Net Income $ 529,000 375,000 17,000 REQUIREMENTS Compute the following ratios for the current year: 1. Current ratio 2. Debt to equity ratico 3. Gross profit percentage

Explanation / Answer

a) Current Ratio = Current Assets/Current liabilities

                        = 109500/90000

Current Ratio = 1.22 times

b) Debt to equity ratio = Total debt /Total equity

                                 = 90000/10500

Debt to equity ratio = 8.57 times

c) Gross profit percentage = Gross profit*100/sales

                                       = (529000-375000)*100/529000

Gross profit percentage = 29.11%

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