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USPshnik [31]
3 years ago
15

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

Business
1 answer:
Leokris [45]3 years ago
6 0

Answer:

Just Dew It Corporation

2017 Ratios:

A 1. Debt-equity ratio = Total debt/Equity = 72%

A 2. Equity multiplier  = 58%

B. Total debt ratio = 42%

Long-term debt ratio = 14%

2. 2018 Ratios:

A. Current ratio = 96%

B. Quick ratio = 36%

C. Cash ratio = 9.5%

D. NWC to total assets ratio = -0.89%

E. Debt-equity ratio and equity multiplier:

Debt-equity ratio = 63%

Equity Multiplier = 61%

F. Total debt ratio and long-term debt ratio:

Total debt ratio = 38.5%

Long-term debt ratio = 14%

Explanation:

a) Data and Calculations:

JUST DEW IT CORPORATION

2017 and 2018 Balance Sheets

Assets Liabilities and Owners' Equity

2017 2018  

Current assets               2017         2018

Cash                             $10,150     $10,300

Accounts receivable     27,700       28,950

Inventory                      62,300       64,800

Total current assets $100,150   $104,050

Fixed assets

Net plant and

equipment            $325,000  $342,000  

Total assets            $425,150  $446,050

Current liabilities        2017         2018

Accounts payable   $70,250     $61,250

Notes payable           47,250       46,750

Total                       $117,500    $108,000

Long-term debt     $59,900     $63,900

Total liabilities      $177,400     $171,900

Owners' equity

Common stock and  

paid-in surplus     $89,000    $89,000

Retained earnings 158,750      185,150

Total                    $247,750   $274,150

Total liabilities and

owners' equity   $425,150  $446,050

2017 Ratios:

Debt-equity ratio = Total debt/Equity =  $177,400/$247,750 = 0.72 or 72%

Equity multiplier = Equity/Assets = $247,750/$425,150 = 58%

B. Total debt ratio = $177,400/$425,150 = 42%

Long-term debt ratio = $59,900/$425,150 = 14%

2. 2018 Ratios:

A. Current ratio = Current assets/current liabilities

= $104,050/$108,000 = 96%

B. Quick ratio = $(104,050-64,800)/$108,000 = 36%

C. Cash ratio = $10,300/$108,000 = 9.5%

D. NWC to total assets ratio = ($104,050-$108,000)/$446,050 = -0.89%

E. Debt-equity ratio and equity multiplier:

Debt-equity ratio = $171,900/$274,150 = 63%

Equity Multiplier = $274,150/$446,050 = 61%

F. Total debt ratio and long-term debt ratio:

Total debt ratio = $171,900/$446,050 = 38.5%

Long-term debt ratio = $63,900/$446,050 = 14%

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