Concept explainers
(a)
Liquidity ratio measures the short-term capacity of a company to pay its maturing obligations, and to meet unanticipated requirements for cash. Liquidity ratios are
Solvency ratio
Solvency ratio measures the capacity of a company to sustain over a long period of time. Solvency ratios are debt to assets ratio, time interest earned ratio, and debt to equity ratio, and more.
To Compute: The current ratio and working capital of Company G for the year 2017.
(b)
To Compute: The current ratio and working capital of Company G, if the company used $3,000 cash to pay off $3,000 of accounts payable for the year 2017.
(c)
To Compute: The debt to assets ratio using total liabilities and total assets of Company G for the year 2017.
To Compute: The times interest earned ratio using earnings before interest, and taxes and interest expenses for the year 2017.
Want to see the full answer?
Check out a sample textbook solutionChapter 10 Solutions
Financial Accounting: Tools for Business Decision Making, 8th Edition
- The AHAI Company's balance sheet of December 31, 2018 is given below: Accounts payable Notes payable Accrued wages and taxes Long-term debt Common equity Total liabilities & equity Cash Accounts receivable Inventory Net fixed assets Total assets O a. $6 O b. $7 O c. $8 O d. $40 O e. $5 $10 25 40 95 $170 $20 25 15 30 80 $170 Sales during the past year were $1,000, and they are expected to increase to $2,000 during 2019. AHAI's fixed assets were used to 60% of capacity during 2018, but its current assets were at their proper levels. All assets except fixed assets increase at the same rate as sales, and fixed assets would also increase at the same rate if the current excess capacity did not exist. Assume that AHAI's profit margin will remain constant at 4.25 percent and that the company will continue to pay out 40 percent of its earnings as dividends. What amount of additional funds (AFN) will be needed during the next year assuming the company would use up the excess capacity before…arrow_forwardProvide answerarrow_forwardNeed answerarrow_forward
- Presented below are a number of balance sheet items for Montoya, Inc., for 2019. Unsecured notes payable (long term) 16,00,000 Accumulated depreciation-Equipment $ 292,000 Payroll taxes payable 177,591 Inventory 239,800 Bonds payable 300,000 Rent payable (short-term) 45,000 Discount on bonds payable 15,000 Income tax payable 98,362 Cash 360,000 Rent payable (long-term) 480,000 Land 480,000 Common stock$1 par value 200,000 Notes receivable 445,700 Preferred stock $10 par value 150,000 Notes payable (to banks) 265,000 Prepaid expenses 87,920 Accounts payable 490,000 Equipment 14,70,000 Retained earnings 713,897 Equity Investment (trading-cost) 111,000 Income tax receivable 97,630 Accumulated depreciation-Building 270,200 Goodwill 125,000 Building 16,40,000 Common stock authorized was 400,000 shares, and preferred stock authorized was 20,000 shares. Assume that notes receivable and notes payable are short-term, unless stated otherwise. Fair value of equity investments (trading) is…arrow_forwardBold Company’s 2016 income statement reported total credit revenue of $250,000. Bold’s accounts receivable balance on January 1, 2016 was $30,000, and its December 31, 2016 accounts receivable balance was $10,000. Bold’s accounts payable balance on January 1, 2016 was $25,000, and its December 31, 2016 accounts payable balance was $35,000. How much did Bold collect from customers during 2016?arrow_forwardUse the data from the following financial statements in the popup window, LOADING... . The company paid interest expense of $17,800 for 2017 and had an overall tax rate of 40% for 2017. Find the cash flow from assets for 2017, and break it into its three parts: operating cash flow, capital spending, and change in net working capital. Partial Income Statement Year Ending 2017 Sales revenue $349,900 Cost of goods sold $141,900 Fixed costs $43,000 Selling, general, and administrative expenses $28,200 Depreciation $45,900 (Click on the following icon in order to copy its contents into a spreadsheet.) Partial Balance Sheet 12/31/2016 ASSETS LIABILITIES Cash $15,900 Notes payable $13,800 Accounts receivable $28,200 Accounts payable $19,000 Inventories $47,900 Long-term debt $189,800 Fixed assets $368,000 OWNERS' EQUITY Accumulated depreciation $141,900 Retained…arrow_forward
- Selected information about income statement accounts for the Reed Company is presented below (the company's fiscal year ends on December 31): 2018 2017 Sales $ 4,550,000 $ 3,650,000 Cost of goods sold 2,890,000 2,030,000 Administrative expenses 830,000 705,000 Selling expenses 390,000 342,000 Interest revenue 153,000 143,000 Interest expense 206,000 206,000 Loss on sale of assets of discontinued component 62,000 — On July 1, 2018, the company adopted a plan to discontinue a division that qualifies as a component of an entity as defined by GAAP. The assets of the component were sold on September 30, 2018, for $62,000 less than their book value. Results of operations for the component (included in the above account balances) were as follows: 1/1/18-9/30/18 2017 Sales $ 430,000 $ 530,000 Cost of goods sold (305,000 ) (338,000 ) Administrative expenses (53,000 ) (43,000 ) Selling…arrow_forwardjituarrow_forwardJudon Corp. provides the following information from its annual report. Assume all revenues are credit sales. The cost of revenues can be used as an approximation of the company's purchases for the year. Revenues $ 546,190 Cost of revenues $ 340,275 Inventories as of 31 January 2022 $44,064 Inventories as of 31 January 2021 $41,020 Accounts payable as at 31 January 2022 $58,600 Accounts payable as at 31 January 2021 $51,800 Accounts receivable as at 31 January 2022 $7,482 Accounts receivable as at 31 January 2021 $5,434 Compute the following financial ratios for Judon Corp for 2022 1. Account Receivable Turnover Ratio (Times)? 2. Collection Interval (DSO) / Days? 3. Inventory Turnover Ratio (Times) ? 4. Holding Interval (Days) ? 5. Account Payable Turnover Ratio (Times)? 6.Payment Interval (Days)? 7. Does Judon Corp need short-term financing? 8. Using the information provided, compute the change in operating working captialarrow_forward
- Judon Corp. provides the following information from its annual report. Assume all revenues are credit sales. The cost of revenues can be used as an approximation of the company's purchases for the year. Revenues $ 546,190 Cost of revenues $ 340,275 Inventories as of 31 January 2022 $44,064 Inventories as of 31 January 2021 $41,020 Accounts payable as at 31 January 2022 $58,600 Accounts payable as at 31 January 2021 $51,800 Accounts receivable as at 31 January 2022 $7,482 Accounts receivable as at 31 January 2021 $5,434 Compute the following financial ratios for Judon Corp for 2022 1. Account Receivable Turnover Ratio (Times)? 2. Collection Interval (DSO) / Days? 3. Inventory Turnover Ratio (Times) ? 4. Holding Interval (Days) ? 5. Account Payable Turnover Ratio (Times)? 6.Payment Interval (Days)? 7. Does Judon Corp need short-term financing?arrow_forwardFollowing are the income statement and some additional information for Richmond Corporation for 2021. Richmond Supplies Corporation Income Statement For the Year Ended December 31, 2022 Net sales $10,000 Cost of goods sold (1,500) Gross margin 8,500 Operating expenses $2,000 Depreciation expense 900 (2,900) Income before taxes 5,600 Income taxes (1,600) Net income $4,000 All sales were on credit and accounts receivable increased by $600 in 2022 compared to 2021. Merchandise purchases were on credit with an increase in accounts payable of $400 during the year. Ending inventory was $500 larger than beginning inventory. Income taxes payable increased $300 during the year. All operating expenses were paid for in cash. Required: Prepare the cash flows from operating activities section of the statement of cash flows using the indirect…arrow_forwardDuring 2021, Blossom Inc. has the following account balances in Income Statement: Sales 1,630,245 Cost of Sales 646,788 Selling Expense 235,500 Administrative Expense 114,766 Other Expense 57,146 Income Tax Expense 200,400 Other Revenue 65,800 What will be the Net income?arrow_forward
- EBK CONTEMPORARY FINANCIAL MANAGEMENTFinanceISBN:9781337514835Author:MOYERPublisher:CENGAGE LEARNING - CONSIGNMENTManagerial Accounting: The Cornerstone of Busines...AccountingISBN:9781337115773Author:Maryanne M. Mowen, Don R. Hansen, Dan L. HeitgerPublisher:Cengage LearningFinancial AccountingAccountingISBN:9781305088436Author:Carl Warren, Jim Reeve, Jonathan DuchacPublisher:Cengage Learning