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Managem
Managem. MIKE HW Ch 3 & Ch 5 6 Saved Help 9 Assets 2017 5.88 points Current assets Cash Accounts receivable Inventory 2017 and 2018 Balance Sheets Liabilities and Owners' Equity 2018 2017 Current liabilities $ 12,750 Accounts payable $ 50,000 14,250 Notes payable 19,000 95,250 $ 6,600 12,200 2018 $ 68,750 78.200 Book Total 35,500 $ 97,000 $ 122,250 References Total 69,000 Long-term debt $ 104,250 $ 48,000 $ 45,000 Owners' equity Common stock and paid in surplus Retained earnings Net plant and equipment $303,000 $ 50,000 233,000 $ 377,750 Total assets $ 50,000 300,750 Total $400,000 $500,000 $283,000 Total liabilities and owners' equity $ 350.750 Based on the balance sheets given for Just Dew it: $400,000 a. Calculate the current ratio for each vear. (Do not round intermediate calculations $500,000
Expert Solution
Answer:
| 2017 | 2018 | ||||
| a | Current ratio | 1.41 | times | 1.17 | times |
| b | Quick ratio | 0.27 | times | 0.26 | times |
| c | Cash ratio | 0.09 | times | 0.12 | times |
| d | NWC ratio | 0.07 | % | 0.03 | % |
| e | Debt-equity ratio | 0.41 | times | 0.42 | times |
| Equity multiplier | 1.41 | times | 1.42 | times | |
| f | Total debt ratio | 0.29 | times | 0.30 | times |
| Long term debt ratio | 0.12 | times | 0.09 | times |
calculations;
| Formula | Workings(2017) | Workings(2018) | |
| Current ratio | Current assets / Current liabilities | 97,000/69,000=1.41 | 122,250/104,250=1.17 |
| Quick ratio |
Liquid assets / current liablities (liquid assets are current assets excluding inventory) |
18,800/69000 = 0.27 (Liquid assets=Current assets - inventory =97,000 - 78,200=18,800) |
27,000/104,250 = 0.26 (Liquid assets=current assets - inventory =122,250 - 95,250=27,000) |
| Cash ratio |
Cash & cash equivalents / current libilities (no other current assets like accounts receivable, inventory are included.) |
6,600/69,000 = 0.09 |
12,750/104,250 = 0.12 |
| NWC ratio | (Current assets - current liabilities) / Total assets | (97,000-69,000) / 400,000 = 0.07 | (122,250-104,250) / 500,000= 0.03 |
| Debt equity ratio | Total liabilities / Share holders' equity |
117,000/283,000 = 0.41 (total libilities = current liabilities + long term debt, 117,000 = 69,000+48,000) |
149,250/350,750 = 0.42 (149,250 = 104,250+45,000) |
| Equity multilier | Total assets / total share holders equity | 400,000/283,000 = 1.41 | 500,000/350,750 =1.42 |
| Total debt ratio | Total liabilities / total assets | 117,000/400,000=0.29 | 149,250/500,000=0.30 |
| Long term debt ratio | Long term debt / Total assets | 48,000/400,000=0.12 | 45,000/500,000=0.09 |
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