The Following Data Are Taken from the Financial Statements of Dellmont

question 19

Essay

The following data are taken from the financial statements of Dellmont Company. Additional information:
Information taken from the financial statements of Dellmont's major competitor: Information taken from industry publications:
Average current ratio is 2.5:1
Average acid-test ratio is 1.9:1
Instructions
Calculate Dellmont's working capital and current and acid-test ratios, and comment on the company's liquidity.

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Definitions:

Cash Dividends

Payments made by a company out of its profits to its shareholders, usually on a periodic basis.

Percentage of Sales

An approach used to forecast the future financials of a company based on its current sales data and growth assumptions, commonly used in financial modeling.

Dividend Policy

A company's stance on distributing profits back to its shareholders either in the form of dividends or stock repurchase.

Full Capacity

The utmost production capacity a firm can maintain over a certain period under typical situations.