Canadian Bacon Inc. financial statements are presented in the table below. Based

Question

Canadian Bacon Inc. financial statements are presented in the table below.

Based on the information in the table, caluclate the firm’s the net-working capital – to-sales ratio.

Round the answers to two decimal places in percentage form.

Balance Sheet December 31, 2012

Income Statement, Year of 2012

Cash and marketable securities $198,000 Accounts payable $288,000 Accounts receivable $469,000 Notes payable $65,000 Inventories $577,000 Accrued expenses $84,000 Prepaid expenses $15,700 Total current liabilities $437,000 Total current assets $1,259,700 Long-term debt $237,000 Gross fixed assets $1,954,000 Par value and paid-in-capital $199,000 Less: accumulated depreciation $476,000 Retained Earnings $1,864,700 Net fixed assets $1,478,000 Common Equity 2,063,700 Total assets $2,737,700 Total liabilities and owner’s equity $2,737,700

Explanation / Answer

First we need to calculate net working capital

Net working capital = current assets – current liabilities

                                       = $1,259,700-$437,000

                                = $822,700

Net working capital to sales ratio = Net working capital/ Sales

                                                  = $822,700/$7,546,600

                                                = 10.90%

First we need to calculate net working capital

Net working capital = current assets – current liabilities

                                       = $1,259,700-$437,000

                                = $822,700

Net working capital to sales ratio = Net working capital/ Sales

                                                  = $822,700/$7,546,600

                                                = 10.90%

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