a. Calculations for Current Ratio:-
Current Ratio calculated by Current Assets divided
by Current Liabilities.
Current Ratio=(Current Assets/Current
Liabilities)
Current Assets=Cash+Accounts
Receivable+Inventories+Prepaid Insurance
=$(68,000+52,000+58,000+28,000)
=$206,000
Current Liabilities=Accounts Payable+Interest
Payable
=$(18,500+8,500)
=$27,000
Current Ratio=(Current Assets/Current
Liabilities)
=(206,000/27,000)
=7.63:1
b. Calculations for Acid - test Ratio:-
Acid - Test Ratio calculated by Quick Assets divided
by Current Liabilities.
Acid - Test Ratio=(Quick Assets/Current
Liabilities)
Quick Assets= Cash+Accounts
Receivable
=$(68,000+52,000)
=$120,000
Acid - Test Ratio=(Quick Assets/Current
Liabilities)
=$(120,000/27,000)
=4.44:1
c. Calculations for Debt to Equity Ratio:-
Debt to Equity Ratio calculated by Total Liabilities
divided by Stockholders Equity.
Debt to Equity Ratio=(Total Liabilities/Stockholders
Equity)
Total Liabilities=Accounts Payable+Interest
Payable+Notes Payable
=$(18,500+8,500+140,000)
=$167,000
Stockholders Equity=Common Stock+Retained
Earnings
=$(83,000+82,000)
=$165,000
Debt to Equity Ratio=Total Liabilities/ Stockholders
Equity
=$(167,000/165,000)
=1.012:1
