Question

Question 4

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The condensed financial statements of Wildhorse Co. for the years 2019 and 2020 are presented below.

WILDHORSE CO. Balance Sheets December 31 (in thousands)
		2020		2019
Current assets
Cash and cash equivalents		$330		$360
Accounts receivable (net)		550		480
Inventory		660		590
Prepaid expenses		130		160
Total current assets		1,670		1,590
Property, plant, and equipment (net)		410		380
Investments		90		90
Intangibles and other assets		530		510
Total assets		$2,700		$2,570
Current liabilities		$900		$870
Long-term liabilities		680		580
Stockholders’ equity—common		1,120		1,120
Total liabilities and stockholders’ equity		$2,700		$2,570

WILDHORSE CO. Income Statements For the Year Ended December 31 (in thousands)
		2020		2019
Sales revenue		$4,000		$3,660
Costs and expenses
Cost of goods sold		1,050		970
Selling & administrative expenses		2,400		2,330
Interest expense		10		20
Total costs and expenses		3,460		3,320
Income before income taxes		540		340
Income tax expense		216		136
Net income		$ 324		$ 204

Compute the following ratios for 2020 and 2019. (Round current ratio and inventory turnover to 2 decimal places, e.g 1.83 and all other answers to 1 decimal place, e.g. 1.8 or 12.6%.)

(a)		Current ratio.
(b)		Inventory turnover. (Inventory on December 31, 2018, was $350.)
(c)		Profit margin.
(d)		Return on assets. (Assets on December 31, 2018, were $2,780.)
(e)		Return on common stockholders’ equity. (Equity on December 31, 2018, was $980.)
(f)		Debt to assets ratio.
(g)		Times interest earned.

		2020			2019
(a) Current ratio.			:1			:1
(b) Inventory turnover.
(c) Profit margin.			%			%
(d) Return on assets.			%			%
(e) Return on common stockholders’ equity.			%			%
(f) Debt to assets ratio.			%			%
(g) Times interest earned.			times			times

Answer 1