BuyFindarrow_forward

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

FINANCIAL RATIOS Use the spreadsheet and financial statements prepared in Problem 15-8A. All sales are credit sales. The Accounts Receivable balance on January 1, 20--, was $10,200.

REQUIRED

Prepare the following financial ratios:

  1. (a) Current ratio
  2. (b) Quick ratio
  3. (c) Working capital
  4. (d) Return on owner’s equity
  5. (e) Accounts receivable turnover and average number of days required to collect receivables
  6. (f) Inventory turnover and average number of days required to sell inventory

To determine

Prepare the following financial ratios.

  1. (a) Current ratio
  2. (b) Quick ratio
  3. (c) Working capital
  4. (d) Return on owner’s equity
  5. (e) Accounts receivable turnover and average number of days require collecting receivables.
  6. (f) Inventory turnover and average number of days required to sell inventory
Explanation

Ratio analysis: The analysis of a company using the financial ratios and comparing its trends and measure its performance within the company and the companies of the industry is known as ratio analysis. The main categories of ratio analyses are liquidity ratios, profitability ratios, activity ratios, and leverage ratios.

(a)

Compute current ratio.

Current ratio =Current assetsCurrent liabilities=$103,000$17,800=5.79to 1

(b)

Compute quick ratio.

Quick ratio =Quick assetsCurrent liabilites=($23,440+9,360)$17,800=1.84to 1

(c)

Compute working capital.

Working capital =Current assets Current liabilites=$103,000$17,800=$85,200

(d)

Compute return on owners’ equity.

Return on owners' equity=Net incomeAverage owners' equity=$78,080($504,320+$607,600)2=$78,080$555,960=14

Still sussing out bartleby?

Check out a sample textbook solution.

See a sample solution

The Solution to Your Study Problems

Bartleby provides explanations to thousands of textbook problems written by our experts, many with advanced degrees!

Get Started

Additional Business Solutions

Find more solutions based on key concepts

Show solutions add

What are demand deposits and why should they be included in the stock of money?

Brief Principles of Macroeconomics (MindTap Course List)

FUTURE VALUE FOR VARIOUS COMPOUNDING PERIODS Find the amount to which 500 will grow under each of these conditi...

Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition, 1 term (6 months) Printed Access Card) (MindTap Course List)

What is a kaizen standard? Describe the kaizen and maintenance subcycles.

Cornerstones of Cost Management (Cornerstones Series)