Chapter 13, Problem 4PSB

To determine

Current ratio:

Current ratio is the ratio which is used to measure a company’s liquidity and it considers current assets and current liabilities.

Acid test ratio:

Acid test ratio is a ratio which is measures the ability of a company to pay off its current obligations out of near cash or quick assets.

Day’s sales uncollected:

Day’s sales uncollected imply how much days a company takes to collect its accounts receivables.

Inventory turnover:

Frequency of a company’s inventory sold or returned is shown by inventory turnover.

Day’s sales in inventory:

Day’s sales inventory shows the average number of days the company not selling its inventory or holding it before selling.

Debt to equity ratio:

Debt to equity ratio is a solvency ratio which indicates relative proportion of total liabilities and total equity.

Time interest earned:

Time interest earned is the ratio which reflects risk of loan repayments of vendors or creditors of with interest.

Profit margin ratio:

Profit margin ratio shows net income as a percent of sales. This ratio reflects a company’s ability of earning.

Total assets turnover ratio:

Total assets turnover ratio is the measurement of a company’s revenue or sales to its value of total assets.

Return on total assets ratio:

Measurement of a company’s earnings against its net assets is known as return on total assets ratio.

Return on common stockholder’s equity:

Return on common stockholder’s equity displays returns received on stockholder’s equity for a certain period of time.

To compute: (1) current ratio, (2) acid test ratio, (3) day’s sales uncollected, (4) inventory turnover (5) day’s sales in inventory (6) debt to equity ratio (7) time interest earned (8) profit margin ratio (9) total assets turnover ratio (10) return on total assets ratio (11) return on common stockholder’s equity of S Company.