Question

The Company had the following financial data; (10 pts) (show your work)

2017                                                           2016                                                 

Current Assets               45,000                  Current Assets               25,000       

AR                                 30,000                  AR                                 40,000

Inventory                       15,000                  Inventory                       20,000       

Total Assets                             120,000                Total Assets                             105,000

Current Liabilities                    30,000                  Current Liabilities                   25,000

Long Term Liabilities     90,000                  Long Term Liabilities     70,000

Equity                            45,000                  Equity                            5,000        

Sales                               220,000                Sales                               150,000                COGS                             90,000                  COGS                            70,000       

Net Income                     20,000                  Net Income                    10,000       

Authorized shares                    5,000                    Authorized shares                    5,000

Outstanding shares                  2,500                    Outstanding shares                  2,000

What is the Current ratio for 2017?

What is the Inventory Turnover ratio for 2017?

What is the Debt to Asset ratio for 2017?

What is the Return on Equity ratio for 2017?

What is the EPS in 2017?

Please show work

Answer 1

Answer to Part 1.

Current Ratio = Current Assets / Current Liabilities
Current Ratio for 2017 = 45,000 / 30,000
Current Ratio for 2017 = 1.50: 1

Answer to Part 2.

Inventory Turnover Ratio = Cost of Goods Sold / Average Inventory
Average Inventory = (15,000 + 20,000) / 2 = $17,500
Inventory Turnover Ratio for 2017 = 90,000 / 17,500
Inventory Turnover Ratio for 2017 = 5.14 times

Answer to Part 3.

Debt to Assets Ratio = Total Debt / Total Assets
Debt to Assets Ratio for 2017 = 90,000 / 120,000
Debt to Assets Ratio for 2017 = 0.75 times

Answer to Part 4.

Return on Equity Ratio = Net Income / Average Equity
Average Equity = (45,000 + 5,000) / 2 = $25,000
Return on Equity Ratio for 2017 = 20,000 / 25,000
Return on Equity Ratio for 2017 = 0.80 times

Answer to Part 5.

Earnings per Share = Net Income / Shares Outstanding
Earnings per Share for 2017 = 20,000 / 2,500
Earnings per Share for 2017 = $8