A Corporation Reports the Following Year-End Balance Sheet Data

question 86

Essay

A corporation reports the following year-end balance sheet data.Calculate the following ratios:
(a)working capital
(b)acid-test ratio
(c)current ratio
(d)debt ratio
(e)equity ratio
(f)debt-to-equity ratio
Cash……………………….. $ 40,000 Current liabilities $ 64,000
Accounts receivable………. 35,000 Long-term liabilities……….72,000
Inventory………………….. 60,000 Common stock……………..100,000
Equipment………………… 150,000 Retained earnings…………. 49,000
Total assets……………….. $285,000 Total liabilities and equity $285,000

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Definitions:

Reserve Requirement

The fraction of deposits that banks are required to hold in reserve and not lend out, which is used by central banks as a tool to control the money supply.

Deposits

Funds placed into an account at a banking institution for safekeeping and potential interest accrual.

Reserve Ratio

The reserve ratio is the fraction of deposits that a bank is required to hold in reserve and not lend out, set by the central bank to control the money supply.

Money Multiplier

A concept that describes the amount of money that banks can generate with each dollar of reserves.