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Assets 2019 2018 Amount Cash & equivalents $20,000.00 Cash & equivalents $10,000.00 Accounts Receivable $15,000.00 Accounts...

Assets
2019 2018 Amount
Cash & equivalents $20,000.00 Cash & equivalents $10,000.00
Accounts Receivable $15,000.00 Accounts Receivable $25,000.00
Inventory $10,000.00 Inventory $15,000.00
Total current assets $45,000.00 Total current assets $50,000.00
Net Plant and equipment $50,000.00 Net Plant and equipment $60,000.00
Total assets $95,000.00 Total assets $110,000.00
Liabilities and equity Liabilities and equity
Accounts payable $5,000.00 Accounts payable $7,000.00
Accruals $2,000.00 Accruals $3,000.00
Notes payable $10,000.00 Notes payable $5,000.00
Total current liabilities $17,000.00 Total current liabilities $15,000.00
Long term debts $25,000.00 Long term debts $35,000.00
Total liabilities $42,000.00 Total liabilities $50,000.00
Common Equity $43,000.00 Common Equity $53,000.00
Retained earnings 10,000.00 Retained earnings 7,000.00
Total common equity $53,000.00 Total common equity $60,000.00
Total Liability and equity $95,000.00 Total Liability and equity $110,000.00
Find the following ratio
Liquidity
Quick
Inventory turnover
Total asset turnover
Debt ratio
Net profit margin
Return on equity

Solutions

Expert Solution

Ratios of year 2019 are being calculated here:

1. Current ratio = Current assets / Current liabilities

For 2019:

Current assets = $45000, Current liabilities = $17000

Current ratio = $45000 / $17000 = 2.65

2. Quick ratio = Current assets – Inventories – Prepaid expenses / Current liabilities

Current assets = $45000, Current liabilities = $17000, Inventories = $10000

Quick ratio = ($45000 - $10000) / $17000

Quick ratio = $35000 / $17000 = 2.06

3. Inventory turnover ratio = Cost of the goods sold / Average inventory

where, Average inventory = Beginning inventory + Ending inventory / 2

Income statement (for finding cost of goods sold) is needed for this ratio

(4) Total assets turnover ratio = Net Sales / Average total assets * 100

where, Average total assets = Beginning assets + Ending assets / 2

Income statement (for finding sales)  is needed for this ratio.

(5) Debt ratio = Total liabilities / Total assets

For 2019:

Total liabilities = $42000, Total assets = $95000

Debt ratio = $42000 / $95000 = 0.44

(6) Net Profit margin = Net income / Sales * 100

Income statement is needed for this ratio.

(7) Return on equity (ROE) = Net income / Average stockholder's equity * 100

where, Average stockholder's  equity = Beginning stockholder's equity + Ending stockholder's equity / 2

Income statement is needed for this ratio.

jeff jeffy answered 1 year ago
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