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Use the following selected data from Business Solutions’s income statement for the three months ended March...

Use the following selected data from Business Solutions’s income statement for the three months ended March 31, 2020, and from its March 31, 2020, balance sheet to complete the requirements.


Computer services revenue	$	26,771
Net sales (of goods)		20,100
Total sales and revenue		46,871
Cost of goods sold		15,752
Net income		20,277
Quick assets		91,044
Current assets		97,392
Total assets		118,776
Current liabilities		745
Total liabilities		745
Total equity		118,031

Required:
1. Compute the gross margin ratio (both with and without services revenue) and net profit margin ratio.
2. Compute the current ratio and acid-test ratio.
3. Compute the debt ratio and equity ratio.
4. What percent of its assets are current? What percent are long term?

Expert Solution

Question 1

Gross Margin Ratio = Gross Margin / Total Revenue

* 100

Without Service Revenue

Gross Margin = Net Sales of Goods - Cost of Goods Sold

Gross Margin = 20,100 - 15,752

Gross Margin = 4,348

Gross Margin Ratio = 4,348 / 20,100 * 100%

Gross Margin Ratio = 21.63%

With Service Revenue

Gross Margin = Computer Service Revenue + Net Sales of Goods - Cost of Goods Sold

Gross Margin = 26,771 + 20,100 - 15,752

Gross Margin = $ 31,119

Total Revenue = Computer Service Revenue + Net Sales of Goods

Total Revenue = 26,771 + 20,100 = $ 46,871

Gross Margin Ratio = 31,119 / 46,871 * 100

Gross Margin Ratio = 66.39%

Net Profit Ratio = Net Income / Total Revenue including Service Revenue * 100

Net Profit Ratio = 20,277 / 46,871 * 100

Net Profit Ratio = 43.26%

Question 2

Current Ratio = Current Assets / Current Liabilities

Current Ratio = 97,392 / 745

Current Ratio = 130.73 Times or 130.73:1

Acid Test Ratio = Quick Assets / Current Liabilities

Acid Test Ratio = 91,044 / 735

Acid Test Ratio = 122.21 Times or 122.21:1

Question 3

Debt Ratio = Total Liabilities / Total Assets

Debt Ratio = 745 / 118,776

Debt Ratio = 0.006 : 1 or 0.006 Times

Equity Ratio = Total Equity / Total Assets

Equity Ratio = 118,031 / 118,776

Equity Ratio = 0.994:1 or 0.994 Times

Question 4

Current Assets in % = Current Assets / Total Assets * 100

Current Assets in % = 97,392 / 118,776

Current Assets in % = 81.997%

Long Term Asset in % = Long Term Asset / Total Assets * 100

Long Term Asset in % = 21,384 / 118,776 * 100

Long Term Asset in % = 18.003%

ekkarill92 answered 1 year ago

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Use the following selected data from Business Solutions’s income statement for the three months ended March...

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