Calculate the following ratios: * Current Ratio * Operating Return on Assets * T
ID: 2777779 • Letter: C
Question
Calculate the following ratios:
* Current Ratio * Operating Return on Assets
* Times Interest Earned * Debt Ratio
* Inventory Turnover * Average Collection Period
* Total Asset Turnover * Fixed-Asset Turnover
* Operating Profit Margin * Return on Equity
J.P. Robard Manufacturing Company Balance Sheet
Cash 500
Accounts Receivable 2,000
Inventories 1,000
Current Assets 3,500
Net Fixed Assets 4,500
Total Assets 8,000
Accounts Payable 1,100
Accrued Expenses 600
Short-term Notes Payable 300
Current Liabilities 2,000
Long-term debt 2,000
Owner's Equity 4,000
Total Debt and Equity 8,000
Income Statement
Sales (all credit) 8,000
Cost of Goods Sold 3,300
Gross Profit 4,700
Operating Expenses (includes $500 depreciation) 3,000
Operating Profits 1,700
Interest Expense 367
Earnings Before Taxes 1,333
Income Taxes (40%) 533
Net Income 800
Thanks.
Explanation / Answer
Computation of following ratios
Current ratio = Current assets / Current liabilities
= $3500 / $2000 = 1.75
Times interest earned ratio = EBIT / interest expenses
= $1700 / $367 = 4.63
Inventory turnover ratio = Cost of goods sold / average stock
= $3300 / $1000 = 3.3
Total assets turnover ratio = Net sales / total assets
= 8000 / 8000 = 1.
Operating profit margin = operating profit / net sales * 100
= $1700 / $8000 * 100 = 21.25
Operating return on assets = EBIT / Total assets
= $1700 /$ 8000 = 0.2125
Debt ratio = Total debt / Total assets
= $2000 /$ 8000 = 0.25
Average collection period = 365 * accounts receivable / credit sales
= (365 * $2000) / $8000 = 91.25
Fixed assets turnover ratio = netsales / fixed assets
= $8000 / $4500 = 1.78
Return on equity = EAT / Share holders funds * 100
= $ 800 / $ 4000 * 100 = 20.
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