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Instructions a. Compute the following (round to one decimal place): 1. Current ratio 3. Working capital 2. Quick ratio 4. Debt ratio b. Comment on these measurements and evaluate Ahmed's short-term debt-paying ability. c. Compute the following ratios (assume that the year-end amounts of total assets and total stock holders' equity also represent the average amounts throughout the year): 1. Return on assets 2. Return on equity

Instructions a. Compute the following (round to one decimal place): 1. Current ratio 3. Working capital 2. Quick ratio 4. Debt ratio b. Comment on these measurements and evaluate Ahmed's short-term debt-paying ability. c. Compute the following ratios (assume that the year-end amounts of total assets and total stock holders' equity also represent the average amounts throughout the year): 1. Return on assets 2. Return on equity

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Shown below are selected data from the financial statements of Ahmed Stores, a retail lighting store: From the balance sheet: Cash .. Accounts receivable Inventory . . Plant assets (net of accumulated depreciation) Current liabilities Total stockholders' equity $ 5,000 15,000 .25,000 50,000 10,000 50,000 1,30,000 Total assets. From the income statement: Net sales... Cost of goods sold Operating expenses. Interest expense Income tax expense. Net income $2,40,000 1,80,000 49,500 8,000 4,000 21,000 From the statement of cash flows: Net cash provided by operating activities (including interest paid of $7,000). Net cash used in investing activities . Financing activities: Amounts borrowed.. Repayment of amounts borrowed . Dividends paid.. Net cash provided by financing activities. Net increase in cash during the year. . $ 5,000 (5,000) $ 5,000 (2,000) (2,000) 8,000 $ 4,000 Instructions a. Compute the following (round to one decimal place): 1. Current ratio 3. Working capital 2. Quick ratio 4. Debt ratio b. Comment on these measurements and evaluate Ahmed's short-term debt-paying ability. c. Compute the following ratios (assume that the year-end amounts of total assets and total stock holders' equity also represent the average amounts throughout the year): 1. Return on assets 2. Return on equity d. Comment on the company's performance under these measurements. Explain why the return on assets and returm on equity are so different?
Transcribed Image Text:Shown below are selected data from the financial statements of Ahmed Stores, a retail lighting store: From the balance sheet: Cash .. Accounts receivable Inventory . . Plant assets (net of accumulated depreciation) Current liabilities Total stockholders' equity $ 5,000 15,000 .25,000 50,000 10,000 50,000 1,30,000 Total assets. From the income statement: Net sales... Cost of goods sold Operating expenses. Interest expense Income tax expense. Net income $2,40,000 1,80,000 49,500 8,000 4,000 21,000 From the statement of cash flows: Net cash provided by operating activities (including interest paid of $7,000). Net cash used in investing activities . Financing activities: Amounts borrowed.. Repayment of amounts borrowed . Dividends paid.. Net cash provided by financing activities. Net increase in cash during the year. . $ 5,000 (5,000) $ 5,000 (2,000) (2,000) 8,000 $ 4,000 Instructions a. Compute the following (round to one decimal place): 1. Current ratio 3. Working capital 2. Quick ratio 4. Debt ratio b. Comment on these measurements and evaluate Ahmed's short-term debt-paying ability. c. Compute the following ratios (assume that the year-end amounts of total assets and total stock holders' equity also represent the average amounts throughout the year): 1. Return on assets 2. Return on equity d. Comment on the company's performance under these measurements. Explain why the return on assets and returm on equity are so different?
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