Question

Use the income statement and balance sheets below to prepare the following ratios for Miller Corporation for the year 2020.

	MILLER CORPORATION
Assets
Cash		$140,000	$100,000
Account Receivable		220,000	200,000
Inventory		100,000	80,000
Equipment		200,000	120,000
Building		800,000	800,000
Total Assets		$1,460,000	$1,300,000
Liabilities and Stockholders' Equity
Accounts Payable		$115,000	$190,000
Bonds Payable(Long-Term)		480,000	520,000
Common Stock		420,000	405,000
Retained Earnings		445,000	185,000
Tot Liab & Equity		$1,460,000	$1,300,000
	INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 2020
Net Sales		$860,000
Cost of Goods Sold		240,000
Gross Margin		620,000
Operating Expenses		220,000
Operating Income		400,000
Interest Expense		20,000
Income Before Taxes		380,000
Income Taxes		120,000
Net Income		$260,000
Earnings Per Share		$2.00

Required Ratios:
a) Current Ratio –
b) Quick Ratio –
c) Receivable Turnover
d) Inventory Turnover
e) Profit Margin
f) Return on Assets
g) Debt to Equity Ratio
h) Times Interest Earned

Answer 1

a)	Current ratio	Current assets / Current liabilities	460,000 / 115,000	4.00
b)	Quick ratio	(Current assets - Inventory) / Current liabilities	(460,000 - 100,000) / 115,000	3.13
c)	AR Turnover	Revenue / Avg AR	860,000 / (220,000 + 200,000)/2	4.10
d)	Inventory turnover	Cost of sales / Avg Inventory	240,000 / (100,000 + 80,000)/2	2.67
e)	Profit margin	Net Income / Revenue	260,000 / 860,000	30.23%
f)	Return on total assets	Net Income / Avg Total Assets	260,000 / (1,460,000 + 1,300,000)/2	18.84%
g)	Debt to Equity	Total Liabilities / Total Equity	595,000 / 865,000	0.69
h)	Times Interest Earned	Operating Income / Interest	400,000 / 20,000	20.00

g) Alternatively, it can be calculated using just the Long term debt, in that case answer would be 0.55