Homework #1D Liquidity and Profitability Ratios
Question 1
Current Ratio = Current Assets / Current Liabilities
This Problem: Current Ratio = Total Current Assets / Total Current Liabilities
American Bacon Inc. financial statements are presented in the table below.
Based on the information in the table, calculate the firm’s current ratio.
Round the answers to two decimal places
Balance Sheet December 31, 2010
Cash and marketable securities $102,000 Accounts payable
$287,000
Accounts receivable $299,000 Notes payable
$61,200
Inventories $628,000 Accrued expenses
$51,900
Prepaid expenses $10,300 Total current liabilities
$400,100
Total current assets $1,039,300 Long-term debt
$415,000
Gross fixed assets $1,502,000 Par value and paid-in-capital
$376,000
Less: accumulated depreciation $312,000 Retained Earnings
$1,038,200
Net fixed assets $1,190,000 Common Equity
$1,414,200
Total assets $2,229,300 Total liabilities and owner’s equity
$2,229,300
Income statement, Year of 2010
Net sales (all credit) $6,387,700.00
Less: Cost of goods sold $4,726,898.00
Selling and administrative expenses $345,000.00
Depreciation expense $148,000.00
EBIT $1,167,802.00
Interest expense $50,600.00
Earnings before taxes $1,117,202.00
Income taxes $446,880.80
Net income $670,321.20
This study source was downloaded by 100000872281541 from CourseHero.com on 09-23-2023 15:03:51 GMT -05:00
https://www.coursehero.com/file/16441821/FINC-330-Homework-1D-Liquidity-and-Profitability-Ratios/
, Answer:
2.6
Question 2
Acid-Test Ratio (also known as Quick Test Ratio)
Acid-Test Ratio = Current Assets – Inventory / Current Liabilities
This Problem: Acid-Test Ratio = Total Current Assets – Inventories / Total Current
Liabilities
Canadian Bacon Inc. financial statements are presented in the table below.
Based on the information in the table, calculate the firm’s acid-test ratio (quick ratio).
Round the answers to two decimal places
Balance Sheet December 31, 2011
Cash and marketable securities $143,000 Accounts payable $278,000
Accounts receivable $354,000 Notes payable $87,000
Inventories $672,000 Accrued expenses
$65,000
Prepaid expenses $12,500 Total current liabilities
$430,000
Total current assets $1,181,500 Long-term debt
$284,000
Gross fixed assets $1,675,000 Par value and paid-in-capital
$228,000
Less: accumulated depreciation $500,000 Retained Earnings
$1,414,500
Net fixed assets $1,175,000 Common Equity
$1,642,500
Total assets $2,356,500 Total liabilities and owner’s equity
$2,356,500
Income Statement Year of 2011
Net sales (all credit) $3,136,600.00
Less: Cost of goods sold $2,195,620.00
Selling and administrative expenses $345,000.00
Depreciation expense $146,000.00
EBIT $449,980.00
Interest expense $45,300.00
Earnings before taxes $404,680.00
Income taxes $161,872.00
Net income $242,808.00
This study source was downloaded by 100000872281541 from CourseHero.com on 09-23-2023 15:03:51 GMT -05:00
https://www.coursehero.com/file/16441821/FINC-330-Homework-1D-Liquidity-and-Profitability-Ratios/
Question 1
Current Ratio = Current Assets / Current Liabilities
This Problem: Current Ratio = Total Current Assets / Total Current Liabilities
American Bacon Inc. financial statements are presented in the table below.
Based on the information in the table, calculate the firm’s current ratio.
Round the answers to two decimal places
Balance Sheet December 31, 2010
Cash and marketable securities $102,000 Accounts payable
$287,000
Accounts receivable $299,000 Notes payable
$61,200
Inventories $628,000 Accrued expenses
$51,900
Prepaid expenses $10,300 Total current liabilities
$400,100
Total current assets $1,039,300 Long-term debt
$415,000
Gross fixed assets $1,502,000 Par value and paid-in-capital
$376,000
Less: accumulated depreciation $312,000 Retained Earnings
$1,038,200
Net fixed assets $1,190,000 Common Equity
$1,414,200
Total assets $2,229,300 Total liabilities and owner’s equity
$2,229,300
Income statement, Year of 2010
Net sales (all credit) $6,387,700.00
Less: Cost of goods sold $4,726,898.00
Selling and administrative expenses $345,000.00
Depreciation expense $148,000.00
EBIT $1,167,802.00
Interest expense $50,600.00
Earnings before taxes $1,117,202.00
Income taxes $446,880.80
Net income $670,321.20
This study source was downloaded by 100000872281541 from CourseHero.com on 09-23-2023 15:03:51 GMT -05:00
https://www.coursehero.com/file/16441821/FINC-330-Homework-1D-Liquidity-and-Profitability-Ratios/
, Answer:
2.6
Question 2
Acid-Test Ratio (also known as Quick Test Ratio)
Acid-Test Ratio = Current Assets – Inventory / Current Liabilities
This Problem: Acid-Test Ratio = Total Current Assets – Inventories / Total Current
Liabilities
Canadian Bacon Inc. financial statements are presented in the table below.
Based on the information in the table, calculate the firm’s acid-test ratio (quick ratio).
Round the answers to two decimal places
Balance Sheet December 31, 2011
Cash and marketable securities $143,000 Accounts payable $278,000
Accounts receivable $354,000 Notes payable $87,000
Inventories $672,000 Accrued expenses
$65,000
Prepaid expenses $12,500 Total current liabilities
$430,000
Total current assets $1,181,500 Long-term debt
$284,000
Gross fixed assets $1,675,000 Par value and paid-in-capital
$228,000
Less: accumulated depreciation $500,000 Retained Earnings
$1,414,500
Net fixed assets $1,175,000 Common Equity
$1,642,500
Total assets $2,356,500 Total liabilities and owner’s equity
$2,356,500
Income Statement Year of 2011
Net sales (all credit) $3,136,600.00
Less: Cost of goods sold $2,195,620.00
Selling and administrative expenses $345,000.00
Depreciation expense $146,000.00
EBIT $449,980.00
Interest expense $45,300.00
Earnings before taxes $404,680.00
Income taxes $161,872.00
Net income $242,808.00
This study source was downloaded by 100000872281541 from CourseHero.com on 09-23-2023 15:03:51 GMT -05:00
https://www.coursehero.com/file/16441821/FINC-330-Homework-1D-Liquidity-and-Profitability-Ratios/
