Given on the balance sheets given for Just dew It, calculate the following finan

Question

Given on the balance sheets given for Just dew It, calculate the following financial ratios for each year: a. Current ratio. b. Quick ratio. c. Cash ratio. d. NWC to total assets ratio. e. Deb-equity ratio and equity multiplier. f. Total debt ratio and long-term debt ratio.

Just Dew It Corporation 2008 and 2009 Balance Sheets Assets Liability and Owner's Equity 2008 2009 2008 2009 Current Assets Current Liabilities Cash $8,436 $10,157 Accounts payable $43,050 $46,821 Accounts receivable 21,530 23,406 Notes payable 18,384 17,382 Total $61,434 $64,203 Inventory 38,760 42,650 Total $68,726 $76,213 Long-term debt $25,000 $32,000 Owner's equity Common Stock and paid-in surplus $40,000 $40,000 Retained earnings 168,998 188,316 Net plant and equipment $226,706 $248,306 Total $208,998 $228,316 Total liablities Total assets $295,432 $324,519 and owners equity 295,432 324,519

Explanation / Answer

2008 Current Ratio = $68,726/$61,434 = 1.12 2009 Current Ratio = $76,213/$64,203 = 1.19 2008 Quick Ratio = $8,436 + $21,530/$61,434 = 0.4877 2009 Quick Ratio = $10,157 + $23,406/$64,203 = 0.5228 2008 Cash Ratio = $8,436 /$61,434 = 0.1373 2009 Cash Ratio = $10,157 /$64,203 = 0.1582 2008 NWC to total assets = $68,726 - $61,434/ $295,432= 0.02468 2009 NWC to total assets = $76,213 - $64,203/$324,519 = 0.03700 2008 Debt-equity ratio = $25000+$61,434/ $208,998= 0.4136 2009 Debt-equity ratio= $32000+$64,203/ $228,316= 0.4214 2008 equity multiplier = $295,432/$208,998 = 1.414 2009 equity multiplier = $324,519/$228,316 = 1.424 2008 Total debt ratio = $25000+$61,434/$295,432 = 0.2925 2009 Total debt ratio = $32000+$64,203/ $324,519 = 0.2965 2008 long-term debt ratio = $25000/$295,432 = 0.0846 2009 long-term debt ratio = $32000/ $324,519 = 0.0986

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