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 $ 10,050 $ 10,300 Accounts payable $ 74,750 $ 58,500 Accounts receivable 27,300 28,950 Notes payable 49,000 50,000 Inventory 64,900 64,000 Total $ 123,750 $ 108,500 Total $ 102,250 $ 103,250 Long-term debt $ 64,400 $ 63,200 Owners' equity Common stock and paid-in surplus $ 84,000 $ 84,000 Fixed assets Retained earnings 166,100 190,550 Net plant and equipment $ 336,000 $ 343,000 Total $ 250,100 $ 274,550 Total assets $ 438,250 $ 446,250 Total liabilities and owners' equity $ 438,250 $ 446,250 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 Ratio = Current Assets / Current Liabilities
Current Ratio = $102,250 / $123,750
Current Ratio = 0.83

For 2018:

Current Ratio = Current Assets / Current Liabilities
Current Ratio = $103,250 / $108,500
Current Ratio = 0.95

Answer of Part b:

For 2017:

Quick Ratio = (Current Assets – Inventory) / Current Liabilities
Quick Ratio = ($102,250 - $64,900) / $123,750
Quick Ratio = $37,350 / $123,750
Quick Ratio = 0.30

For 2018:

Quick Ratio = (Current Assets – Inventory) / Current Liabilities
Quick Ratio = ($103,250 - $64,000) / $108,500
Quick Ratio = $39,250 / $108,500
Quick Ratio = 0.36

Answer of Part c:

For 2017:

Cash Ratio = Cash / Current Liabilities
Cash Ratio = $10,050 / $123,750
Cash Ratio = 0.08

For 2018:

Cash Ratio = Cash / Current Liabilities
Cash Ratio = $10,300 / $108,500
Cash Ratio = 0.09

Answer of Part d:

For 2017:

NWC = Current Assets – Current Liabilities
NWC = $102,250 - $123,750
NWC = -$21,500

NWC to Total Assets = NWC / Total Assets
NWC to total assets = -$21,500 / $438,250
NWC to total Assets = -0.05

For 2018:

NWC = Current Assets – Current Liabilities
NWC = $103,250 - $108,500
NWC = -$5,250

NWC to Total Assets = NWC / Total Assets
NWC to total assets = -$5,250 / $446,250
NWC to total Assets = -0.01