Financial Statements for Marcell Company Appear Below -Marcell Company's Current Ratio at the End of Year 2

question 135

Multiple Choice

Financial statements for Marcell Company appear below:

$\begin{array}{|l|r|}\hline &\begin{array}{r}\text { Marcell Company } \\\text { Income Statement }\\\text { For the Year Ended December 31, Year } \\2 \\\text { (dollars in thousands) } \\\end{array} \\\hline \text { Sales (All on Account) } & \$ 2550 \\\hline \text { Costs of Goods Sold } & \$ 1780 \\\hline \text { Gross Margin } & \$ 770 \\\hline \text { Operating Expenses } & \$ 300 \\\hline \text { Net Operating Income } & \$ 470 \\\hline \text { Interest Expense } & \$ 50 \\\hline \text { Net Income before Taxes } & \$ 420 \\\hline \text { Income Taxes (30\%) } & \$ 126 \\\hline \text { Net Income } & \$ 294 \\\hline\end{array}$


-Marcell Company's current ratio at the end of Year 2 was closest to which of the following?

• A) 0.42 to 1.
• B) 0.48 to 1.
• C) 1.04 to 1.
• D) 1.22 to 1.

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Definitions:

Inventory

The raw materials, work-in-process products, and finished goods that are considered a part of a business's assets that are ready or will be ready for sale.

After-Tax Salvage Value

The net value of an asset after it has been disposed of and all related taxes have been paid.

Net Working Capital

The difference between a company's current assets and its current liabilities, indicating the financial health and operational efficiency.

Interest Expense

The cost incurred by an entity for borrowed funds, often expressed as an annual percentage of the principal.