Question

Just Dew It Corporation reports the following balance sheet information for 2017 and 2018.

Answer 1

Answer:

a. Current ratio for 2017  -  1.14

   Current ratio for 2018  - 1.38

b. Quick ratio for 2017    - 0.30

   Quick ratio for 2018    - 0.41

c.  Cash ratio for 2017    - 0.09

   Cash ratio for 2018    - 0.11

d. NWC to Total Assets 2017 -   0.03

   NWC to Total Assets 2018 -   0.07

e. Debt equity ratio 2017 -   0,49 and equity multiplier 1,49

   Debt equity ratio 2018 -   0.36 and equity multiplier 1.36

f. Total Debt ratio 2017  0.33 and long term debt ratio  0.10

  Total Debt ratio 2018  0.27 and long term debt ratio  0.08

Explanation:

Current ratio is calculated by dividing the current assets  by the current liabilities

                                                           2017                                  2018

                                                             $                                        $

Current assets                                   84,000                            105.800

Current Liabilities                              73,440                               76.600

Current ratio

2017 - 84,000/ 73,440                      1.14                  

2018   105,800 / 76,600                                                              1.38    

Quick ratio is calculated by excluding the inventory balances from the current assets.

Current assets excl. inventory         22,220                               31,200

Current Liabilities                              73,440                               76.600

Quick Ratio

2017 22,220/73,440                            0.30

2018  31,200/76,600                                                                        0.41

Cash ratio is calculated by only considering cash and cash equivalents and dividing by the current liabilities

Cash balances                                   6,500                                 8.600

Current Liabilities                              73,440                               76.600

Cash ratio

2017 - 6,500/ 73,440                           0.09                

2018   8,600 / 76,600                                                                        0.11    

NWC to Total assets is calculated by dividing the net working capital to the total assets of the company

Current assets                                   84,000                            105.800

Current Liabilities                              73,440                               76.600

Net working capital                           10.560                                29,200    

Total assets                                     320,000                             400,000

NWC to Total assets Ratio

2017 - 10,560/320,000                          0.03

2018 - 29,200/400,000                                                                   0.07

Debt equity ratio is calculated by dividing the total liabilities of the company with its total equity

Current Liabilities                                73,440                                76,600

Long Term Liabilities                          32,000                               30,000  

Total debt of the company               105,440                               106,600

Common stock                                    40,000                                40,000

Retained Earnings                             174,560                               253,400

Total Equity                                        214,560                                293,400

Debt Equity ratio

2017 - 105,440/214,560                        0,49

2018 - 106,600/293,400                                                                     0.36

Equity multiplier is calculated by dividing the total assets over total equity

Total assets                                        320,000                                 400,000

Total Equity                                         214,560                                  293,400

Equity multiplier

2017 - 320,000/214,560                          1.49

2018 - 400,000/293,400                                                                        1.36

Total debt ratio is calculated by dividing the total debt with the total assets. The long term debt ratio divides the long term debt with the total assets

Total debt of the company               105,440                                  106,600

Total assets                                       320,000                                 400,000

The total debt ratio

2017 - 105,440/320,000                         0.33  

2018 - 106,600/400,000                                                                         0.27

Long Term Liabilities                         32,000                                    30,000

Total Equity                                         214,560                                  293,400

2017 - 32,000/ 214,560                             0.10

2018 - 30,000/ 293,400                                                                          0.08

Answer 2

Answer:

Cash : (2017)= 6560 ; (2018) = 8600

Account Payable: (2017) = 51840 ; (2018) = 53000

Account receivable: (2017) = 16160 ; (2018) = 22600

Notes payable: (2017) = 21600 ; (2018) = 23600

Inventory : (2017) = 61280 ; (2018) = 74600

Long-term debt: (2017)= 32000 ; (2018) = 30000

Owners equity : (2017)= 40000 ; (2018) = 40000

Retained earning: (2017) = 174560 ; (2018) = 253400

Net Plant & equipment: (2017) = 236000 ; (2018) = 294200

Total Assets: (2017) = 320000 ; (2018) = 400000

Total equity and liabilities: (2017) = 320000 ; (2018) = 400000

Current assets = Cash + Account receivable + Inventory

Current liabilities = Accounts payable +Notes payable

As we know that : Current ratio = Current assets / current liabilities.

       (2017) = (6560+16160+61280) / (51840+21600)=84000/73440=1.14

      (2018) =(8600+22600+74600)/ (53000+23600)=105800/76600=1.38

As we know that : Quick ratio = (Cash + securities + Account receivable)/ Current liabilities.

             (2017)=(6560+16160)/73440=22720/73440= 0.30

            (2018)= (8600+22600)/76600=31200/76600=0.40

As we know that Cash ratio = cash &cash equivalent / current liabilities

           (2017) =  6560 / 73440 = 0.089

           (2018) = 8600 / 76600 =0.112

As we know that NWC to total asset ratio = net working capital / Total assets.

Net working capital = current assets - current liabilities.

       (2017) NWC=84000-73440=10560

       (2018) NWC = 105800-76600=29200

NWC ratio:

        (2017) =   10560 /320000= 0.033

        (2018)= 29200  /400000= 0.073

As we know that debt to equity ratio = Total liabilities / Total shareholder equity.

Total liabilities (2017)= 51840 + 21600 + 32000 = 105440

Total liabilities (2018)= 53000 + 23600 + 30000 = 106600

  Total equity  (2017) =40000+174560= 214560

 Total equity (2018) = 40000+253400 = 293400

   ratio (2017) = 105440/214560=0.49

  ratio(2018) =106600/293400=0.36

As we know that total debts ratio = Total debt / Total assets

Total debt (2017) = 51840+21600+32000 =105440

Total debt (2018) = 53000+23600+30000=106600

 ratio (2017) =105440/320000=0.32

 ratio (2018) =106600/400000=0.26

As we know that long-term debt ratio = long-term debt / total assets

       (2017) = 32000/320000=0.1

       (2018) =30000/400000=0.075