Financial Ratios calculation

Table 1 (use for Problems 24-27)

Smith Company Balance Sheet

Assets:

Cash and marketable securities $300,000

Accounts receivable 2,215,000

Inventories 1,837,500

Prepaid expenses 24,000

Total current assets $3,286,500

Fixed assets 2,700,000

Less: accumulated depreciation 1,087,500

Net fixed assets $1,612,500

Total assets $4,899,000

Liabilities:

Accounts payable $240,000

Notes payable 825,000

Accrued taxes 42,500

Total current liabilities $1,107,000

Long-term debt 975,000

Owner’s equity 2,817,000

Total liabilities and owner’s equity $4,899,000

Net sales (all credit) $6,375,000

Less: Cost of goods sold 4,312,500

Selling and administrative expense 1,387,500

Depreciation expense 135,000

Interest expense 127,000

Earnings before taxes $412,500

Income taxes 225,000

Net income $187,500

Common stock dividends $97,500

Change in retained earnings $90,000

24. Based on
the information in Table 1, the current ratio is:

a. 2.97.

b. 1.46.

c. 2.11.

d. 2.23.

25. Based on
the information in Table 1, and using a 360-day year, the average collection
period is:

a. 71 days.

b. 84 days.

c. 64 days.

d. 125 days.

26. Based on
the information in Table 1, the debt ratio is:

a. 0.70.

b. 0.20.

c. 0.74.

d. 0.42.

27. Based on
the information in Table 1, the net profit margin is:

a. 4.61%.

b. 2.94%.

c. 1.97%.

d. 5.33%.

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