Question

Just Dew It Corporation reports the following balance sheet information for 2014 and 2015.

  

JUST DEW IT CORPORATION 2014 and 2015 Balance Sheets
Assets									Liabilities and Owners’ Equity
	2014				2015					2014				2015
Current assets									Current liabilities
Cash	$	13,280			$	14,600			Accounts payable	$	40,000			$	41,800
Accounts receivable		7,520				19,200			Notes payable		14,240				21,600
Inventory		42,400				51,000
Total	$	63,200			$	84,800			Total	$	54,240			$	63,400
									Long-term debt	$	32,000			$	24,000
									Owners’ equity
									Common stock and paid-in surplus	$	40,000			$	40,000
									Retained earnings		193,760				272,600
Net plant and equipment	$	256,800			$	315,200			Total	$	233,760			$	312,600
Total assets	$	320,000			$	400,000			Total liabilities and owners’ equity	$	320,000			$	400,000
Based on the balance sheets given for Just Dew It:      a. Calculate the current ratio for each year. (Do not round intermediate calculations. Round your answers to 2 decimal places, e.g., 32.16.)      2014 2015   Current ratio times times     b. Calculate the quick ratio for each year. (Do not round intermediate calculations. Round your answers to 2 decimal places, e.g., 32.16.)      2014 2015   Quick ratio times times    c. Calculate the cash ratio for each year. (Do not round intermediate calculations. Round your answers to 2 decimal places, e.g., 32.16.)      2014 2015   Cash ratio times times    d. Calculate the NWC to total assets ratio for each year. (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)       2014 2015   NWC ratio % %    e. Calculate the debt–equity ratio and equity multiplier for each year. (Do not round intermediate calculations. Round your answers to 2 decimal places, e.g., 32.16.)    2014 2015   Debt-equity ratio times times   Equity multiplier                      f. Calculate the total debt ratio and long-term debt ratio for each year. (Do not round intermediate calculations. Round your answers to 2 decimal places, e.g., 32.16.)    2014 2015   Total debt ratio times times   Long-term debt ratio times times

Answer 1

a.

Current Ratio:

Current ratio = Current assets/Current liabilities

For 2014:

Current ratio = $ 63,200/ $ 54,240 = 1.1651917 or 1.17 times

For 2015:

Current ratio = $ 84,800/ $ 63,400 = 1.337539 or 1.34 times

b.

Quick Ratio:

Quick ratio = (Cash + Cash Equivalent + Short Term Investment + Current Receivables)/Current liabilities

For 2014:

Quick ratio = ($ 13,280 + $ 7,520)/ $ 54,240 = 0.383481 or 0.38 times

For 2015:

Quick ratio = ($ 14,600 + $ 19,200)/ $ 63,400 = 0.533123 or 0.53 times

c.

Cash ratio = (Cash + Cash Equivalent)/Current liabilities

For 2014:

Cash ratio = $ 13,280 / $ 54,240 = 0.244838 or 0.24 times

For 2015:

Cash ratio = $ 14,600/ $ 63,400 = 0.230284 or 0.23 times

d.

NWC (Net working capital) to total asset ratio = Net current assets/Total assets

For 2014:

NWC ratio = $ 63,200/$ 320,000 = 0.1975 or 19.75 %

For 2015:

NWC ratio = $ 84,800/$ 400,000 = 0.212 or 21.2 %

**** Answered for first four sub-parts.