Problem-solving: Use the following data from a firm\'s pro forma financial state
ID: 2723267 • Letter: P
Question
Problem-solving: Use the following data from a firm's pro forma financial statements to calculate the following ratios for the firm: (a) current ratio to measure liquidity; (b) debt-equity ratio to measure leverage; (c) accounts receivable turnover to measure efficiency; (d) accounts payable turnover to measure efficiency. Current Assets $200 million Current Liabilities 150 million Total Liabilities 400 million Stockholders' Equity 200 million Sales 150 million Accounts Receivable 80 million Costs of Goods Sold 130 million Accounts Payable 65 million
Explanation / Answer
Current ratio = 200/150 = 1.33 times
Debt equity ratio =50/200=.25times
Account receivable turnover =365/(150/80) =194.67 days
Account payable turnover = 365/(130/65) = 182.5 days
Current liabilities
150
Current asset
200
Accounts payable
65
accounts receivable
80
Stock holders equity
200
Total liabilities
400
Debt
50
Current liabilities
150
Current asset
200
Accounts payable
65
accounts receivable
80
Stock holders equity
200
Total liabilities
400
Debt
50
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