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Comparative Balance Sheet of “Alpha- Beta” Assets 2018 2017 Liabilities & Stockholders’ Equity 2018 2017 Fixed...

Comparative Balance Sheet of “Alpha- Beta”
Assets 2018 2017 Liabilities &
Stockholders’ Equity		 2018 2017
Fixed Assets
Property, Plant and
Equipment
Accumulated
depreciation
Net Property, Plant and
Equipment
Other Assets
Total Fixed Assets
Current Assets
Cash and Cash
Equivalents
Accounts receivables
Inventory
Prepaid Expenses
Total Current Assets
Total Assets		 3,250,000
(425,000)
2,825,000
725,000
3,550,000
300,000
900,000
1,100,000
100,000
2,400,000
5,950,000		 2,100,000
(250,000)
1,850,000
550,000
2,400,000
300,000
750,000
800,000
100,000
1,950,000
4,350,000
Shareholders’ Equity
Common Stock
Retained earnings
Total Stockholders’
Equity
Long-term Liabilities
Long-term debt
Total Long-term
Liabilities
Current Liabilities
Accounts Payable
Short-term Debt
Total Current
Liabilities
Total Liabilities
Total Liabilities and
Stockholders’ Equity
1,250,000
997,600
2,247,600
2,200,000
2,200,000
502,400
1,000,000
1,502,400
3,702,400
5,950,000		 1,250,000
600,000
1,850,000
1,150,000
1,150,000
450,000
900,000
1,350,000
2,500,000
4,350,000
Comparative Income Statement of “Alpha- Beta”
2018 2017
Sales
Cost of Goods Sold
Gross Profit
Selling and Administrative Expenses
Net Operating Income
Interest Expenses
Income Before Taxes
Tax
Net Income		 5,000,000
(3,200,000)
1,800,000
(1,000,000)
800,000
(240,000)
560,000
(162,400)
397,600		 3,000,000
(1,800,000)
1,200,000
(900,000)
300,000
(110,000)
190,000
(55,100)
134,900

Given answer from Cheggs expert for quick ratio: Quick Ratio (QR) = (Cash&Cash Equivalents + Current Receivables+Prepaid Expenses or (CA-Inventory)/CL where CA: Current Assets and CL: liabilities

Given answer from Cheggs expert for Days’ Sales in Inventory = (Ending Inventory * 365) / Cost of Goods Sold

Given answer from Cheggs expert for Operating cycle:

Operating Cycle = Days of Sales Inventory + Days of Sales Outstanding - Days payable outsatanding

My Questions:

1) For quick ratio calculation why weren't 'prepaid expenses' substructed, too?

2) I have the impression that the 'Operating cycle' was asked to be calculated not the 'net operating cycle'. Can you please help since all the formula used in the answer confused me? I did not find any reference for the formula day payable outstanding and the average inventory can be found only for year 2018....

3) Can 'Days' sales in inventory' be calculated by using 'sales' instead of CoGs? (that was our tutor's suggestion)

Solutions

Expert Solution


ekkarill92 answered 2 months ago
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