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Use the Following Data to Calculate the Liquidity and Profitability

question 222

Essay

Use the following data to calculate the liquidity and profitability ratios listed below.  Average common shares outstanding 10,000 Current liabilities $100,000 Capital expenditures $20,000 Net income 21,000 Cash provided by operating activities 32,000 Net sales 150,000 Dividends paid 5,000 Total liabilities 126,000 Current assets 190,000 Total assets 210,000\begin{array} { l r l r } \text { Average common shares outstanding } & 10,000 & \text { Current liabilities } & \$ 100,000 \\\text { Capital expenditures } & \$ 20,000 & \text { Net income } & 21,000 \\\text { Cash provided by operating activities } & 32,000 & \text { Net sales } & 150,000 \\\text { Dividends paid } & 5,000 & \text { Total liabilities } & 126,000 \\\text { Current assets } & 190,000 & \text { Total assets } & 210,000\end{array} Instructions
Compute the following:
(a) Current ratio. (d) Debt to assets ratio.
(b) Working capital. (e) Free cash flow.
(c) Earnings per share.

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Definitions:

Total Cost Function

An equation that expresses the total cost of producing a given quantity of output, considering both fixed and variable costs.

Average Total Cost

The total cost of production divided by the number of units produced, signifying the cost per unit of output.

Average Fixed Cost

The total fixed costs of production divided by the number of units produced, showing the fixed cost per unit.

Fixed Factor

An input in the production of goods and services that cannot be easily increased or decreased in the short run.

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