Calculate the Quick Ratio and the Times Interest Earned Ratio

question 47

Essay

Calculate the Quick ratio and the times interest earned ratio for the following company.
\begin{array}{c}\text { Gil's Fish and Tackle, Inc.}\\\text { Balance Sheet}\\\text { At December 31, 2007}\\\begin{array}{lr}\text { Assets }\\\text { Cash } & \$ 22,200 \\\text { Accounts Receivable (less allowance) } & 169,100 \\\text { Inventories } & 68,300 \\\text { Property, Plant, and Equipment } & 102,800 \\\text { Long-term Investments } & 30,000 \\\text { Total Assets } & \$ 392,400\\\\\text { Liabilities }\\\text { Accounts Payable } & \$ 49,200 \\\text { Current Portion of Long-Term Debt } & 68,800 \\\text { Bonds Payable } & 100,000 \\\\\text {Total Liabilities}&\underline{218,000}\\\\\text { Shareholders' Equity }\\\text { Contributed Capital } & 100,000 \\\text { Retained Earnings } & 74,400 \\\text { Total Equity } & \underline{174,400} \\\\\text { Total Liabilities and Equity } &\underline{ \$ 392,400}\\end{array}\end{array} $\begin{array}{c}\text {Gil's Fish and Tackle, Inc. }\\\text {Income Statement}\\\text { For the year ended December 31,2007}\\\begin{array}{lr}\text {Operating Revenue}\\\text {Sales Revenue}&\underline{\$2,765,000}\\\text {Operating Revenue}&\underline{2,765,000}\\\text {Operating Expenses}\\\text { Wages Expense } & 1,850,500 \\\text { Operating and Admin. Expenses } & 286,700 \\\text { Amortization Expense } & \underline{335,400} \\\quad \text { Operating Expenses } & \underline{2.472 .600}\\\\\text { Operating Income } & 292,400\\\\\text { Other Expenses } & \\ \text { Interest Expense } &\underline{17.000} \\\\\text { Income Before Income Tax Expense } & \mathbf{2 7 5 , 4 0 0} \\\text { Income Tax Expense } & 103.800 \\& \\\text { Net Income } & \$ 171.600\end{array}\end{array}$

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Definitions:

Cost-Based Transfer Pricing

A transfer pricing method where the price of goods transferred between departments or subsidiaries is based on the cost of production.

Goal-Congruence Problems

Issues that arise when the objectives of individual members or groups within an organization do not align with the overall goals of the organization, potentially leading to inefficiency or conflict.

Optimal Decisions

The best possible choices made after assessing all available information, resources, and alternatives, aiming to achieve the maximum benefit or efficiency.

Performance Reports

Performance reports are documents that review the progress and outcomes of activities or operations, evaluating performance against specified benchmarks or objectives.