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Homework answers / question archive / Financial Ratios Financial statements for Paulson's Pet Store are shown

Financial Ratios Financial statements for Paulson's Pet Store are shown


Financial Ratios

Financial statements for Paulson's Pet Store are shown.

Paulson's Pet Store

Income Statement

For Year Ended December 31, 20--Revenue from sales:       Sales  $326,040    Less: Sales returns and allowances  5,360       Net sales   $320,680Cost of goods sold:       Merchandise inventory, January 1, 20-- $59,200     Estimated returns inventory, January 1, 20-- 800$60,000    Purchases $162,640     Less: Purchases returns and allowances$4,080      Less: Purchases discounts3,2007,280     Net purchases $155,360     Add freight-in 1,600        Cost of goods purchased  156,960    Goods available for sale  $216,960    Less: Merchandise inventory, December 31, 20-- $64,800     Less: Estimated returns inventory, December 31, 20-- 1,20066,000       Cost of goods sold   150,960Gross profit   $169,720   Operating expenses:       Wages expense  $69,400    Advertising expense  1,200    Supplies expense  800    Phone expense  2,736    Utilities expense  2,864    Insurance expense  1,600    Depreciation expense-building  10,000    Depreciation expense-store equipment  1,800    Miscellaneous expense  600       Total operating expenses   91,000   Income from operations   $78,720Other expenses:       Interest expense   640Net income   $78,080

Paulson's Pet Store

Statement of Owner's Equity

For Year Ended December 31, 20--B. Paulson, capital, January 1, 20--$504,320Add additional investments30,000Total investment$534,320Net income for the year$78,080Less: Withdrawals for the year4,800Increase in capital73,280B. Paulson, capital, December 31, 20--$607,600

Paulson's Pet Store

Balance Sheet

December 31, 20--Assets   Current assets:       Cash $23,440     Accounts receivable 9,360     Merchandise inventory 64,800     Estimated returns inventory 1,200     Supplies 2,400     Prepaid insurance 1,800         Total current assets  $103,000Property, plant, and equipment:       Land $90,000     Building$350,000      Less: Accumulated depreciation20,000330,000     Store Equipment$120,000      Less: Accumulated depreciation3,600116,400536,400Total assets  $639,400Liabilities   Current liabilities:       Note payable$2,000      Accounts payable9,560      Customer refunds payable1,600      Wages payable1,200      Sales tax payable3,440          Total current liabilities $17,800 Long-term liabilities:       Note payable$16,000      Less: Current portion2,00014,000 Total liabilities  $31,800Owner's Equity   B. Paulson, capital  607,600Total liabilities and owner's equity  $639,400

All sales are credit sales. The Accounts Receivable balance on January 1, 20--, was $10,200.


Compute the financial ratios. Round answers to one decimal place.

 1) Current ratio

 2) Quick ratio

 3) Working capital

4) Return on owner's equity

5) Accounts receivable turnover

6) Average number of days to collect receivablesdays

7) Inventory turnover

8) Average number of days to sell inventory

Option 1

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Option 2

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