BA 321 Spring 2018 January 25 2018 Ratio Calculation Exercis

BA 321 Spring 2018 January 25, 2018 Ratio Calculation Exercise Balance Sheet Cash Accounts Receivable Inventories Net Plant and Equipment 50,000 125,000 225,000 Accounts Payable Notes Payable Long-term debt $185,000 125,000 115,000 Common Stock Retained earnings Total liabilities and Stockholders\' Equity 525,000 350,000 150,000 Total Assets $925,000 $925,000 Income Statement Sales Cost of goods sold Depreciation $525,000 215,000 Earnings before interest and taxes 245,000 35,000 Interest expense Net profit before taxes 210,000 Taxes (@ 40%) S126,000 Net income

Solution

1 Quick Ratio (Current assets-Inventory)/Current Liabilities Current assets Cash 50000 Accounts Receivables 125000 Total current assets 175000 Current Liabilities Accounts Payable 185000 Quick ratio= 175000/185000= 0.95 2 Fixed asset turnover Sales/Fixed assets 525000/525000= 1 3 Total asset turnover Sales/Total assets 525000/925000= 0.57 57% 4 Long-term Debt ratio Long-term debt to Total assets (125000+115000)/925000= 0.26 26% 5 Debt-to-Equity ratio Total Debt/Total Equity (125000+115000)/(350000+150000) 48% 6 Times Interest Earned EBIT/Interet expense 245000/35000= 7 Times 7 Profit Margin Net Income/Sales 126000/525000= 24%