Question

In: Finance

Owen Monie is attempting to categorize several items from his company's financial statements so he can...

Owen Monie is attempting to categorize several items from his company's financial statements so he can determine his working capital. Owen notices the following categories of accounts and amounts:
•cash $8,800
•accounts payable $17,250 •accounts receivable $22,100 •sales tax due city $3,125 •sales tax due the state department of revenue $1,500 •inventory $26,500
•wages payable $7,100
•taxes payable (federal) $5,000 •money market fund $18,750
which statement best describes Owen's liquidity ratios?
check all that apply
•this company is sufficiently liquid, his current ratio is above the general rule of 2.0 or higher.
•His company is not sufficiently liquid. Owen will have a difficult time meeting his current obligations
•for every dollar of short-term creditors claims, he has more than $2 to pay for those current obligations
•Owen quick ratio is below the general rule of one or higher indicating liquidity problems

Expert Solution

Answer:

Only statement A and C are correct and are checked as follows:

Explanation:

Let us calculate current ratio:

Current assets = cash + money market fund + accounts receivable + inventory

= $8,800 + 18750 + 22100 + 26500

= $76,150

Current liabilities = Accounts payable + Sales tax due city + Sales tax due the state department of revenue + Wages payable + Taxes payable (federal)

=17250 + 3125 + 1500 + 7100 + 5000

= $33,975

Current ratio = 76150 / 33975 = 2.24

Current ratio is higher than 2. As such statement A and C are correct and statement B is incorrect.

Let us calculate quick ratio:

Quick assets = 8800 + 18750 + 22100 = $49,650

Quick ratio = 49650 / 33975 = 1.46

Quick ratio is much highet than 1 indicating no liquidity problems. As such statement D is incorrect.

jeff jeffy answered 1 year ago

Jason has decided to donate his kidney to his brother Matthew so that he can live....

Jason has decided to donate his kidney to his brother Matthew so that he can live. How would the psychoanalytic, social learning, and cognitive theorists explain his actions?

1. The following items are taken from the financial statements of the Postal Service for the...

1. The following items are taken from the financial statements of the Postal Service for the year ending December 31, 2013: Accounts payable $ 19,000 Accounts receivable 11,000 Accumulated depreciation – equipment 28,000 Advertising expense 21,000 Cash 11,000 Common stock 40,000 Dividends 14,000 Depreciation expense 12,000 Equipment 190,000 Insurance expense 3,000 Note payable, due 6/30/14 70,000 Patents 20,000 Prepaid insurance (12-month policy) 6,000 Rent expense 17,000 Retained earnings (1/1/13) 65,000 Salaries and wages expense 32,000 Service revenue 125,000 Supplies 4,000...

Users of financial statements can face different questions about the recognition and measurement of financial items....

Users of financial statements can face different questions about the recognition and measurement of financial items. To help develop the type of financial information that can be used to answer these questions financial accounting and reporting rules on a conceptual framework. Instructions 1. What are the basic components of the conceptual framework? 2. What are your views about the success of the conceptual framework?

Vincent Fairfield, CEO of MetroAir, sat at his desk, examining the company's latest financial statements. “This...

Vincent Fairfield, CEO of MetroAir, sat at his desk, examining the company's latest financial statements. “This just doesn't make sense to me,” Vincent thought. “We're reporting $1,662,015 in net income, yet our Cash balance decreased by over $350,000. With these results, I would think the Cash balance should go up by at least $1,000,000.” MetroAir Income Statement For the Year Ended December 31, 2016 Sales $78,555,000 Cost of goods sold 58,146,480 Gross profit 20,408,520 Selling expense 5,168,505 Administrative expense 3,814,660...

1.Chapter 2 covers financial ratios. Financial ratios are calculated from a company's financial statements, and they...

1.Chapter 2 covers financial ratios. Financial ratios are calculated from a company's financial statements, and they can be used to determine how well a company is performing. Discuss in detail, the difference between a performance measure and a performance referent and provide a complete example of each. 2.Identify and discuss 5 different financial ratios, show how they are calculated (formula and data sources), and what the ratios seek to identify.

Use the appropriate items to calculate the following from Owen Davis Company’s balance sheet at Dec...

Use the appropriate items to calculate the following from Owen Davis Company’s balance sheet at Dec 31, 2012: total current assets, total gross fixed assets, net fixed assets, Total Assets, total current liabilities, total liabilities, total stockholder's equity, and Total Liabilities & Stockholder's Equity. Item Value ($000) at Dec 31,2012 Item Value ($000) at Dec 31,2012 Accounts payable $220 Inventories $375 Accounts receivable $450 Land $100 Accruals $55 Long-term debts $420 Accumulated depreciation $265 Machinery $420 Buildings $225 Marketable securities...

William is attempting to sign in to his operating system but he receives an error message...

William is attempting to sign in to his operating system but he receives an error message stating that he has entered an invalid password. How can he solve this problem?

A beginning unicyclist is attempting to unicycle from his garage to the end of his driveway—a...

A beginning unicyclist is attempting to unicycle from his garage to the end of his driveway—a distance of 200 feet. His skill is such that, once mounted on the unicycle, he will fall within a distance of x feet from his starting point with probability given by x/250 − x2/5002, for 0 < x < 500. Let X be the distance from the unicyclist’s starting point at which he falls. (a) GivethecdfFX(x)ofX forallx∈R. (b) GivethepdffX(x)ofX forallx∈R. (c) With what probability...

The following items are taken from the financial statements of Novak Company for the year ending...

The following items are taken from the financial statements of Novak Company for the year ending December 31, 2022: Accounts payable $18,000 Accounts receivable 7,600 Accumulated depreciation—equipment 4,600 Bonds payable 18,000 Cash 22,000 Common stock 26,100 Cost of goods sold 28,100 Depreciation expense 5,800 Dividends 5,000 Equipment 42,000 Interest expense 2,600 Patents 5,020 Retained earnings, January 1, 2022 7,200 Salaries and wages expense 6,000 Sales revenue 53,200 Supplies 2,980 can you explain ( Income Statement, Balance Sheet, Current Ratio, Debt...

Financial Statement Items Identify the financial statement (or statements) in which each of the following items...

Financial Statement Items Identify the financial statement (or statements) in which each of the following items would appear: income statement (IS), statement of stockholders’ equity (SSC), balance sheet (BS), or statement of cash flow (SCF). Assets Revenue Cashflow from investing activities Stockholders’ equity Expenses Net change in cash Net Income Liabilities