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College Accounting, Chapters 1-27

23rd Edition
HEINTZ + 1 other
ISBN: 9781337794756

Solutions

Chapter
Section
BuyFindarrow_forward

College Accounting, Chapters 1-27

23rd Edition
HEINTZ + 1 other
ISBN: 9781337794756
Textbook Problem

Using the financial statements for Herman’s Parts provided on page 593, compute the following ratios:

  1. (a) Working capital
  2. (b) Current ratio
  3. (c) Return on owner’s equity
  4. (d) Inventory turnover

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(a)

To determine

Compute working capital for H’s Parts.

Explanation

Working capital: The measure which evaluates the ability of a company to pay off short-term debt obligations, by computing the excess of current assets over current liabilities is referred to as working capital.

Compute working capital for H’s Parts.

Working capital =Current assets 

(b)

To determine

Compute e current ratio for H’s Parts.

(c)

To determine

Compute return on owners’ equity for H’s Parts.

(d)

To determine

Compute inventory turnover for H’s Parts.

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