Use the Financial Data Shown Below to Calculate the Following

question 229

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.
Income statement data
Sales (all on credit) $650,000
Cost of goods sold 425,000
Income before taxes 78,000
Net income 54,600
$\begin{array}{|l|r|r|} \hline& \begin{array}{r}\text { Ending } \\\text { Balance }\end{array} & \begin{array}{r}\text { Beginning } \\\text { Balance }\end{array} \\\hline \text { Cash } & \$ 19,500 & \$ 15,000 \\\hline \text { Accounts receivable (net) } & 65,00 0 & 60,000 \\\hline \text { Inventory } & 71,500 & 64,500 \\\hline \text { Plant and equipment (net) } & 195,000 & 183,900 \\\hline \text { Total assets } & \$ 351,000 & \$ 323,400 \\\hline\end{array}$ $\begin{array}{|l|r|r|}\hline \text { Current liabilities } & \$ 62,400 & \$ 52,700 \\\hline \text { Long-term notes payable } & 97,500 & 100,00 \\\hline\end{array}$

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Definitions:

Government Budget Surpluses

Occurs when a government's revenues exceed its expenditures during a specific time period, allowing for savings or debt repayment.

Demand For Loanable Funds

The desire or willingness of individuals or businesses to borrow money, driven by the interest rate and economic activity.

Equilibrium Interest Rate

The interest rate at which the demand for money in an economy equals the supply of money, leading to an equilibrium in the money market.

Equilibrium Level Of Saving

The amount of saving that occurs when households' intentions to save match actual savings, often equated to investment in macroeconomics.