Answer:
(a) Current ratio = 2.88 : 1
(b) Acid test ratio = 2.03 : 1
(c) Accounts receivable turnover = 4.94 times
(d) Inventory turnover = 6.65 times
(e) Profit margin = 13.12%
(f) Asset turnover = 0.95 times
(g) Return on assets = 12.43%
(h) Return on common stockholders' equity = 14.62%
(i) Debt to assets ratio = 11.17%
Explanation:
Note: This question is not complete. See the attached pdf file for the complete question.
The explanation of the answer is now provided as follows:
a. Current ratio
Current assets = Cash + Accounts receivable (net) + Inventory = $4,100 + $20,900 + $10,400 =
Current liabilities = Accounts payable = $12,300
Current ratio = Current assets / Current liabilities = $35,400 / $12,300 = 2.88 : 1
b. Acid test ratio
Acid test ratio = (Current assets – Inventory) / Current liabilities = ($35,400 - $10,400) / $12,300 = 2.03 : 1
(c) Accounts receivable turnover.
Net sales = $109,000
Average accounts receivable = (20,900 + 23,200) / 2 = $22,050
Accounts receivable turnover = Net sales / Average accounts receivable = $109,000 / $22,050 = 4.94 times
(d) Inventory turnover.
Cost of goods sold = $59,500
Average inventory = (10,400 + 7,500) / 2 = $8,950
Inventory turnover = Cost of goods sold / Average inventory = $59,500 / $8,950 = 6.65 times
(e) Profit margin.
Net income = $14,300
Net sales = $109,000
Profit margin = Net income / Net sales = $14,300 / $109,000 = 0.1312, or 13.12%
(f) Asset turnover.
Net sales = $109,000
Average total assets = ($110,100 + $119,900) / 2 = $115,000
Asset turnover = Net sales / Average total assets = $109,000 / $115,000 = 0.95 times
(g) Return on assets.
Net income = $14,300
Average total assets = ($110,100 + $119,900) / 2 = $115,000
Return on assets = Net income / Average total assets = $14,300 / $115,000 = 0.1243, or 12.43%
(h) Return on common stockholders' equity
Net income = $14,300
Common stockholders' equity = Common stock + Retained earnings = $74,500 + $23,300 = $97,800
Return on common stockholders' equity = Net income / Common stockholders' equity = $14,300 / $97,800 = 0.1462 = 14.62%
(i) Debt to assets ratio
Total liabilities = Accounts payable = $12,300
Total assets = $110,100
Debt to assets ratio = Total liabilities / Total assets = $12,300 / $110,100 = 0.1117, or 11.17%
