50.1K

Verified Solution

Link Copied!

Exercise 13-8 Selected Financial Ratios [LO13-2, LO13-3, LO13-4]

The financial statements for Castile Products, Inc., are given below:

Castile Products, Inc. Balance Sheet December 31
Assets
Current assets:
Cash				$	21,000
Accounts receivable, net					200,000
Merchandise inventory					380,000
Prepaid expenses					11,000
Total current assets					612,000
Property and equipment, net					810,000
Total assets				$	1,422,000
Liabilities and Stockholders' Equity
Liabilities:
Current liabilities				$	290,000
Bonds payable, 12%					390,000
Total liabilities					680,000
Stockholders equity:
Common stock, $10 par value				$	190,000
Retained earnings					552,000
Total stockholders equity					742,000
Total liabilities and equity				$	1,422,000

Castile Products, Inc. Income Statement For the Year Ended December 31
Sales	$	2,380,000
Cost of goods sold		1,485,000
Gross margin		895,000
Selling and administrative expenses		630,000
Net operating income		265,000
Interest expense		46,800
Net income before taxes		218,200
Income taxes (30%)		65,460
Net income	$	152,740

Account balances at the beginning of the year were: accounts receivable, $140,000; and inventory, $280,000. All sales were on account.

Required:

Compute the following financial data and ratios:

1.	Working capital.

2.	Current ratio. (Round your answer to 2 decimal places.)

3.	Acid-test ratio. (Round your answer to 2 decimal places.)

4.	Debt-to-equity ratio. (Round your answer to 2 decimal places.)

5.	Times interest earned ratio. (Round your answer to 2 decimal places.)

6.	Average collection period. (Use 365 days in a year. Round your answer to 1 decimal place.)

7.	Average sale period. (Use 365 days in a year. Round your intermediate and final answer to 1 decimal place.)

8.	Operating cycle. (Round your intermediate calculations and final answers to 1 decimal place.)

Answer & Explanation Solved by verified expert

See Answer