C ICE Ch 3 Ratios 12318Compatibility Mode Wotd PAGE LAYOUT R

C ICE Ch 3 Ratios 1-23-18[Compatibility Mode)- Wotd PAGE LAYOUT REFERENCES MAILINGS REVIEW VIEW . ITNormallTNoSpac Heading 2 x, x A··A- -·, Heading 1 Title Font Paragraph Use the income statement and balance sheet that you created on Thursday, January 18 for Green Dating Service, Inc. to compute the ratios listed below. 260,000 190,000 640,000 26,750 180,000 175,000 200,000 Accounts Receivable 250,000 Accounts Payable Cash Capital Surplus Common Stock Depreciation Expense Net Furniture & Fixtures Interest Expense 300,000 40,000 200,000 50,000 305,000 340,000 925,000 15,000 Dividends Goodwill Inventory Line of Credit (used) Retained Earnings Tax rate Land Long Term Loan Sales Shares outstanding 35% Current Ratio Earnings Per Share Book Value Per Share Total Debt Ratio Payables Turnover Days Sales in Payables Recordings for 5 6 8 0

Solution

1.Current ratio= current asset/Current liabilities

Current asset/ Cuurent liabilities= Account receivables+Cash+Inventory/ Account payable+ Line of credit

note:Line of credit assumed as short term liability

So current ratio= 250000+190000+175000/260000+200000 =615000/460000=13.369

2. earning per share= Total earnings available to common stockholders/ No. of shares outstanding

100000/15000=6.67

Calculation of total earnings available to stockholders:

sales: 925000

less cost: 640000

Gross profit= 285000

less depreciation: 40000

=245000

less interest : 50000

net profit before tax = 195000

less tax @35% : 68250

net profit after tax = 126750

less dividend : 26750

profits available to common stockholders=100000

3. book value per share=

shareholder equity/no. of shares outstanding

shareholder equity= common stock+capital surplus+ retained earnings

= 300000+100000+100000/15000= 33.333

4. total debt ratio= total liabilities to outsiders/ total assets

= long term debt+ account payable+ line of credit/ total asset

= 340000+260000+200000/1300000= 800000/1300000= 0.615

5. payable turnover= total purchases/cost/account payable

640000/260000= 2.461 times

6.days sales in payable=365/ payable turnover= 365/2.461=148 days

working notes:

balance sheet

liabilities amount asset amount

capital surplus 100000 account receivables 250000

common stock 300000 net furniture and fixtures 200000

lpong term loan 340000 land 305000

account payable 260000 cash 190000

line of credit 200000 goodwill 180000

retained earnings(balancing fig.) 100000 inventory 175000

1300000 1300000