Question

Just Dew It Corporation reports the following balance sheet information for 2017 and 2018. JUST DEW IT CORPORATION 2017 and 2018 Balance Sheets Assets Liabilities and Owners' Equity 2017 2018 2017 2018 Current assets Current liabilities Cash $ 10,650 $ 10,700 Accounts payable $ 72,000 $ 64,250 Accounts receivable 27,600 27,950 Notes payable 47,500 46,750 Inventory 63,400 64,300 Total $ 119,500 $ 111,000 Total $ 101,650 $ 102,950 Long-term debt $ 56,100 $ 62,500 Owners' equity Common stock and paid-in surplus $ 82,000 $ 82,000 Fixed assets Retained earnings 183,050 194,450 Net plant and equipment $ 339,000 $ 347,000 Total $ 265,050 $ 276,450 Total assets $ 440,650 $ 449,950 Total liabilities and owners' equity $ 440,650 $ 449,950 Based on the balance sheets given for Just Dew It, calculate the following financial ratios for the year 2017. a. Current ratio b. Quick ratio c. Cash ratio d. NWC to total assets ratio e. Debt-equity ratio and equity multiplier f. Total debt ratio and long-term debt ratio Based on the balance sheets given for Just Dew It, calculate the following financial ratios for the year 2018. a. Current ratio b. Quick ratio c. Cash ratio d. NWC to total assets ratio e. Debt-equity ratio and equity multiplier f. Total debt ratio and long-term debt ratio

Answer 1

Answer of Part a:

For 2017:

Current Assets = $101,650

Current Liabilities = $119,500

Current Ratio = Current Assets / Current Liabilities
Current Ratio = $101,650 / $119,500
Current Ratio = 0.85

For 2018:

Current Assets = $102,950

Current Liabilities = $111,000

Current Ratio = Current Assets / Current Liabilities
Current Ratio = $102,950 / $111,000
Current Ratio = 0.93

Answer of Part b:

For 2017:

Quick Ratio = (Current Assets – Inventory) / Current Liabilities
Quick Ratio = ($101,650 - $63,400) / $119,500
Quick Ratio = $38,250 / $119,500
Quick Ratio = 0.32

For 2018:

Quick Ratio = (Current Assets – Inventory) / Current Liabilities
Quick Ratio = ($102,950 - $64,300) / $111,000
Quick Ratio = $38,650 / $111,000
Quick Ratio = 0.35

Answer of Part c:

For 2017:

Cash Ratio = Cash / Current Liabilities
Cash Ratio = $10,650 / $119,500
Cash Ratio = 0.09

For 2018:

Cash Ratio = Cash / Current Liabilities
Cash Ratio = $10,700 / $111,000
Cash Ratio = 0.1

Answer of Part d:

For 2017:

Net Working Capital change= Current Assets – Current Liabilities
Net Working Capital change= $101,650 - $119,500
Net Working Capital Change=- $17,850

NWC to Total Assets Ratio = Net Working Capital Change / Total Asset
NWC to Total Assets Ratio = -$17,850 / $440,650
NWC to Total Assets Ratio = -0.04

For 2018:

Net Working Capital change= Current Assets – Current Liabilities
Net Working Capital change= $102,950 - $111,000
Net Working Capital Change=- $8,050

NWC to Total Assets Ratio = Net Working Capital Change / Total Asset
NWC to Total Assets Ratio = -$8,050 / $449,950
NWC to Total Assets Ratio = -0.02