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Bethesda Mining Company reports the following balance sheet information for 2013 and 2014
| Bethesda Mining Company reports the following balance sheet information for 2013 and 2014. |
| BETHESDA MINING COMPANY Balance Sheets as of December 31, 2013 and 2014 |
|||||||||||||
| 2013 | 2014 | 2013 | 2014 | ||||||||||
| Assets | Liabilities and Owners’ Equity | ||||||||||||
| Current assets | Current liabilities | ||||||||||||
| Cash | $ | 21,396 | $ | 24,385 | Accounts payable | $ | 214,414 | $ | 192,480 | ||||
| Accounts receivable | 51,552 | 58,318 | Notes payable | 99,022 | 134,508 | ||||||||
| Inventory | 121,807 | 143,615 | |||||||||||
| Total | $ | 313,436 | $ | 326,988 | |||||||||
| Total | $ | 194,755 | $ | 226,318 | |||||||||
| Long-term debt | $ | 271,700 | $ | 285,300 | |||||||||
| Owners’ equity | |||||||||||||
| Common stock and paid-in surplus | $ | 200,000 | $ | 200,000 | |||||||||
| Accumulated retained earnings | 132,481 | 171,358 | |||||||||||
| Fixed assets | |||||||||||||
| Net plant and equipment | $ | 722,862 | $ | 757,328 | Total | $ | 332,481 | $ | 371,358 | ||||
| Total assets | $ | 917,617 | $ | 983,646 | Total liabilities and owners’ equity | $ | 917,617 | $ | 983,646 | ||||
| Required: |
| Based on the balance sheets given for Bethesda Mining, calculate the following financial ratios for each year: |
| (a) |
Current ratio. (Do not round intermediate calculations. Round your answers to 2 decimal places (e.g., 32.16).) |
| Current ratio | |
| 2013 | times |
| 2014 | times |
| (b) |
Quick ratio. (Do not round intermediate calculations. Round your answers to 2 decimal places (e.g., 32.16).) |
| Quick ratio | |
| 2013 | times |
| 2014 | times |
| (c) |
Cash ratio. (Do not round intermediate calculations. Round your answers to 2 decimal places (e.g., 32.16).) |
| Cash ratio | |
| 2013 | times |
| 2014 | times |
| (d) |
Debt-equity ratio and equity multiplier. (Do not round intermediate calculations. Round your answers to 2 decimal places (e.g., 32.16).) |
| Debt-equity ratio (times) |
Equity multiplier (times) |
|
| 2013 | ||
| 2014 | ||
| (e) |
Total debt ratio. (Do not round intermediate calculations. Round your answers to 2 decimal places (e.g., 32.16).) |
| Total debt ratio (times) |
|
| 2013 | |
| 2014 | |
Expert Solution
Answer a.
Current Ratio = Current Assets / Current Liabilities
2013:
Current Ratio = $194,755 / $313,436
Current Ratio = 0.62 times
2014
Current Ratio = $226,318 / $326,988
Current Ratio = 0.69 times
Answer b.
Quick Ratio = (Current Assets – Inventory) / Current Liabilities
2013:
Quick Ratio = ($194,755 - $121,807) / $313,436
Quick Ratio = 0.23 times
2014:
Quick Ratio = ($226,318 - $143,615) / $326,988
Quick Ratio = 0.25 times
Answer c.
Cash Ratio = Cash / Current Liabilities
2013:
Cash Ratio = $21,396 / $313,436
Cash Ratio = 0.07 times
2014:
Cash Ratio = $24,385 / $326,988
Cash Ratio = 0.07 times
Answer d.
Debt-equity Ratio = (Current Liabilities + Long-term Debt) / Equity
2013:
Debt-equity Ratio = ($313,436 + $271,700) / $332,481
Debt-equity Ratio = 1.76 times
2014:
Debt-equity Ratio = ($326,988 + $285,300) / $371,358
Debt-equity Ratio = 1.65 times
Equity Multiplier = Total Assets / Equity
2013:
Equity Multiplier = $917,617 / $332,481
Equity Multiplier = 2.76 times
2014:
Equity Multiplier = $983,646 / $371,358
Equity Multiplier = 2.65 times
Answer e.
Debt Ratio = (Current Liabilities + Long-term Debt) / Total Assets
2013:
Debt Ratio = ($313,436 + $271,700) / $917,617
Debt Ratio = 0.64 times
2014:
Debt Ratio = ($326,988 + $285,300) / $983,646
Debt Ratio = 0.62 times
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