Problem 2 Daniel's Place has selected financial ratios for 20X1–20X3 as follows: 20X1 20X2 20X3 Current ratio Accounts receivable turnover 1.1 1.15 1.2 13 12 11 Inventory turnover 24 23 22 Asset turnover 1.3 1.4 1.5 Debt-equity ratio Times interest earned 1.5 1.4 1.3 3.8 3.9 4.0 Sales for the three years were $1 million, $1.2 million, and $1.4 million, respectively. Required: 1. Assume total assets did not change during 20X3. Determine the total debt at the end of 20X3. 2. If cost of sales were 10 percent of total sales, what was the average inventory for 20X3? 3. Comment on the changing liquidity of McDaniel's Place over the three-year period. 4. Comment on the changing solvency of this business over the three-year period.
Problem 2 Daniel's Place has selected financial ratios for 20X1–20X3 as follows: 20X1 20X2 20X3 Current ratio Accounts receivable turnover 1.1 1.15 1.2 13 12 11 Inventory turnover 24 23 22 Asset turnover 1.3 1.4 1.5 Debt-equity ratio Times interest earned 1.5 1.4 1.3 3.8 3.9 4.0 Sales for the three years were $1 million, $1.2 million, and $1.4 million, respectively. Required: 1. Assume total assets did not change during 20X3. Determine the total debt at the end of 20X3. 2. If cost of sales were 10 percent of total sales, what was the average inventory for 20X3? 3. Comment on the changing liquidity of McDaniel's Place over the three-year period. 4. Comment on the changing solvency of this business over the three-year period.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:McDaniel's Place has selected financial ratios for 20X1–20X3 as follows:
Problem 2
MeDaniel's Place has selected financial ratios for 20X1–20X3 as follows:
20X1
20X2
20X3
Current ratio
Accounts receivable turnover
1.1
1.15
1.2
13
12
11
Inventory turnover
24
23
22
Asset turnover
1.3
1.4
1.5
Debt-equity ratio
Times interest earned
1.5
1.4
1.3
3.8
3.9
4.0
Sales for the three years were $1 million, $1.2 million, and $1.4 million, respectively.
Required:
1. Assume total assets did not change during 20X3. Determine the total debt at the end of
20X3.
2. If cost of sales were 10 percent of total sales, what was the average inventory for 20X3?
3. Comment on the changing liquidity of McDaniel's Place over the three-year period.
4. Comment on the changing solvency of this business over the three-year period.
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