Question

Use the following information to calculate the ratios listed below:
Total Assets 650,000
Total Liabilities 300,000
Current Assets 60,000
Current Liabilities 20,000
Net Income 70,000
Shares Outstanding 12,000
Accounts Receivable 55,000
Sales 439,000
Inventory 25,000
Dividends 10,000


Quick Ratio ____________________
Earnings Per Share ___________________
Return on Assets _________________
Debt/Equity Ratio _______________
Days Sales in Receivables ______________

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Answer 1

Ratio	Formula	Ratio
Quick Ratio	Liquid asset/ current liability	1.75
Earnings Per Share	(Net Income - Preferred Dividend) / No of shares outstanding	5.00
Return on Assets	Net Icome / Total Assets	10.77%
Debt Equity Ratio	Debt/Equity	0.80
Days Sales in Receivables	No of Days in the Period/Receivables Turnover Ratio	45.11
Calculation:-
1) Quick ratio= Liquid Current asset/ current liability
Where,
Liquid Current is Current Assets - Inventories
Now,
Liquid Current Assets	60000 - 25000 = 35000
Current liabilities	20000
Quick Ratio	Liquid Current asset/ current liability
Quick Ratio	1.75
2) Earnings Per Share = (Net Income - Preferred Dividend) / No of shares outstanding
Net Income	70000
Dividend	10000
No of Share Outstanding	12000
Earnings Per Share	(70000 - 10000) / 12000 = 5
3) Return on Assets = Net Income / Total Assets
Net Income	70000
Total Assets	650000
Return on Assets	10.77%
4) Debt Equity Ratio = Debt / Equity
where,
Debt = Total Liabilities - Current Liabilities
Equity = Total Assets - Total Liabilities
Debt	300000 - 20000 = 280000
Equity	650000 - 300000 = 350000
Debt Equity Ratio	0.80
5) Receivables Turnover Ratio = Net Credit Sales/ Average Accounts Receivable
Now,
Net Credit Sales	439,000
Average Accounts Receivable	55000
Receivables Turnover Ratio	Net Credit Sales/ Average Accounts Receivable
Receivables Turnover Ratio	7.98
Days Sales in Receivables = No of days in a Period/ Receivable Turnover Ratio
Now,
No of Days	360
Receivables Turnover Ratio	7.98
Days Sales Outstanding	45.11