Use the Financial Data Shown Below to Calculate the Following

question 31

Essay

Use the financial data shown below to calculate the following ratios for the current year:
(a)Current ratio.
(b)Acid-test ratio.
(c)Accounts receivable turnover.
(d)Days' sales uncollected.
(e)Inventory turnover.
(f)Days' sales in inventory.
$$\begin{array}{l}\begin{array} { | l | r | r | } \hline\text { Income statement data }\\\hline \text { Sales } & \$ 650,000 & \\\hline \text { Cost of goods sold } & 425,000 & \\\hline \text { Income before taxes } & 78,000 & \\\hline \text { Net income } & 54,600 & \\\hline & & \\\hline & \text { Ending } & \begin{array} { c } \text { Beginning } \\\text { Balances }\end{array} \\\hline \text { Cash } & \$ 19,500 & \$ 15,000 \\\hline \text { Accounts receivable (net) } & 65,000 & 60,000 \\\hline \text { Inventory } & 71,500 & 64,500 \\\hline \text { Plant and equipment (net) } & \underline { 195,000 } & \underline { 183,900 } \\\hline \text { Total assets } & \$ 351,000 & \$ 323,400 \\\hline & & \\\hline \text { Current liabilities } & \$ 62,400 & \$ 52,700 \\\hline \text { Long-term notes payable } & 97,500 & 100,000 \\\hline\end{array}\end{array}$$

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Definitions:

Profitability

Profitability is a measure of the efficiency and financial success of a business or project, indicated by the ability to generate income greater than its expenses and costs.

Times Interest Earned

Times interest earned is a financial ratio that measures a company's ability to meet its debt obligations by comparing its income before interest and taxes to its interest expenses.

Interest Expense

The cost of borrowing money.

Income Tax Expense

The cost associated with income taxes owed to federal, state, or local governments, recognized in the accounting period in which the income was earned.