Question

The following are the income statement and balance sheet of company X as at year 2015.

Income Statement

Sales

20,077,000

Cost of goods sold

14,985,000

Other Expenses

2,399,000

Depreciation

655,000

EBIT

2,038,000

Interest

362,000

Taxable income

1,676,000

Tax (40%)

670,400

Net income

1,006,600

Balance Sheet

Assets

Liability and Equity

Current Assets

Current liabilities

Cash

365,040 Account payable

715,680

Account Receivable

1,534,680 Notes payable

1,446,400

Inventory

1,238,500 Total current liabilities

2,162,080

Total current assets

3,138,220

Fixed Assets

Long-term debt

3,825,000

Net plant and equipment

12,315,680 Shareholder equity

Common stock

150,000

Retained earnings

9,316,820

Total equity

9,466,820

Total assets

15,453,900 Total liability and equity

15,453,900

Please calculate the following ratio:

a. Gross margin ratio

b. Quick ratio

c. Debt to Asset ratio

Answer 1

Income Statement
Sales	20,077,000
Cost of goods sold	14,985,000
Other Expenses	2,399,000
Depreciation	655,000
EBIT	2,038,000
Interest	362,000
Taxable income	1,676,000
Tax (40%)	670,400
Net income	1,006,600
Balance Sheet
Assets		Liability and Equity
Current Assets		Current liabilities
Cash	365040	Account payable	715,680
Account Receivable	1,534,680	Notes payable	1,446,400
Inventory	1,238,500	Total current liabilities	2,162,080
Total current assets	3,138,220
		Long-term debt	3,825,000
Fixed Assets		Shareholder equity
		Common stock	150,000
Net plant and equipment	12,315,680	Retained earnings	9,316,820
		Total equity	9,466,820
Total assets	15,453,900	Total liability and equity	15,453,900
Gross margin ratio=	(Sale - cost of goods sold)/Sale
Gross margin ratio=	(20077000-14985000)/20077000
Gross margin ratio=	25.36%
Quick ratio=	(Total current asset - inventory)/Total current liability
Quick ratio=	(3138220-1238500)/2162080
Quick ratio=	0.88
Debt to asset ratio=	(Long term debt + total current liability)/Total asset
Debt to asset ratio=	(2162080+3825000)/15453900
Debt to asset ratio=	38.74%