The King Mattress Company had the following operating results for 2018-2019. In addition, the company paid dividends in both 2018 and 2019 of $64,800 per year and made capital expenditures in both years of $30,000 per year. The company's stock price in 2018 was $8 and $7 in 2019. The industry average earnings multiple for the mattress industry was 9 in 2019 and the free cash flow and sales multiples were 18 and 1.5, respectively. The company is publicly owned and has 1,200,000 shares of outstanding stock at the end of 2019. Balance Sheet, Dec 31, 20192018Cash$356,000 $116,000 Accounts Receivable$366,000 $416,000 Inventory$266,000 $316,000 Total Current Assets$988,000 $848,000 Long-lived Assets 1,240,000 1,260,000 Total Assets$2,228,000 $2,108,000 Current Liabilities$216,000 $316,000 Long-term Debt 616,000 516,000 Shareholder Equity 1,396,000 1,276,000 Total Debt and Equity$2,228,000 $2,108,000 Income Statement, for year ended Dec 31, 20192018Sales$4,830,000 $4,580,000 Cost of Sales 4,164,000 4,064,000 Gross Margin 666,000 516,000 Operating Expenses 358,000 408,000 Operating Income 308,000 108,000 Taxes 123,200 43,200 Net Income$184,800 $64,800 Cash Flow From Operations2019 2018Net Income$184,800 $64,800 Plus Depreciation Expense 50,000 50,000 + Decrease (-inc) in AccRec. and Inv. 100,000 - + Increase (-dec) in Cur. Liabl. (100,000) - Cash Flow from Operations$234,800 $114,800 The current ratio for 2019 is: Multiple Choice 3.8 1.9 4.6 1.7

Answer :- correct option is 4.6 .

Answered: The King Mattress Company had the…

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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The King Mattress Company had the following operating results for 2018-2019. In addition, the company paid dividends in both 2018 and 2019 of $64,800 per year and made capital expenditures in both years of $30,000 per year. The company's stock price in 2018 was $8 and $7 in 2019. The industry average earnings multiple for the mattress industry was 9 in 2019 and the free cash flow and sales multiples were 18 and 1.5, respectively. The company is publicly owned and has 1,200,000 shares of outstanding stock at the end of 2019.

Balance Sheet, Dec 31,
	2019	2018
Cash	$	356,000	$	116,000
Accounts Receivable	$	366,000	$	416,000
Inventory	$	266,000	$	316,000
Total Current Assets	$	988,000	$	848,000
Long-lived Assets		1,240,000		1,260,000
Total Assets	$	2,228,000	$	2,108,000
Current Liabilities	$	216,000	$	316,000
Long-term Debt		616,000		516,000
Shareholder Equity		1,396,000		1,276,000
Total Debt and Equity	$	2,228,000	$	2,108,000

Income Statement, for year ended Dec 31,
	2019	2018
Sales	$	4,830,000	$	4,580,000
Cost of Sales		4,164,000		4,064,000
Gross Margin		666,000		516,000
Operating Expenses		358,000		408,000
Operating Income		308,000		108,000
Taxes		123,200		43,200
Net Income	$	184,800	$	64,800

Cash Flow From Operations	2019		2018
Net Income	$	184,800		$	64,800
Plus Depreciation Expense		50,000			50,000
+ Decrease (-inc) in AccRec. and Inv.		100,000			-
+ Increase (-dec) in Cur. Liabl.		(100,000	)		-
Cash Flow from Operations	$	234,800		$	114,800

The current ratio for 2019 is:

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