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Following is the balance sheet of Duluth Company for 2018. DULUTH COMPANY Balance sheet Assets Cash...

Following is the balance sheet of Duluth Company for 2018.

DULUTH COMPANY
Balance sheet
Assets
Cash $ 36,000
Marketable securities 24,000
Accounts receivable 50,000
Inventory 44,000
Property and equipment 320,000
Accumulated depreciation (74,000 )
Total assets $ 400,000
Liabilities and Stockholders’ Equity
Accounts payable $ 23,000
Current notes payable 7,000
Mortgage payable 8,000
Bonds payable 43,000
Common stock 200,000
Retained earnings 119,000
Total liabilities and stockholders’ equity $ 400,000

The average number of common stock shares outstanding during 2018 was 880 shares. Net income for the year was $40,000.


Calculate: Current Ratio, Earnings Per Share, Quick Ratio, Return on Investment, Return on Equity, Debt to Equity Ratio

Solutions

Expert Solution

Calculation of current ratio:

Current ratio = Current assets / Current liabilities

Current assets = Cash + Marketable securities + Accounts receivable + Inventory

= 36,000 + 24,000 + 50,000 + 44,000

= $154,000

Current liabilities = Accounts payable + current notes payable

= 23,000 + 7,000

= $30,000

Now substitute the values in the above formula:

Current ratio = 154,000 / 30,000

= 5.13 times

Therefore, current ratio is 5.13 times

Calculation of earnings per share (EPS):

EPS = Net income / average number of shares outstanding

Net income = $40,000

Shares outstanding = 880

Now substitute the values in the above formula:

EPS = 40,000 / 880

= $45.45

Therefore, EPS is $45.45

Calculation of quick ratio:

Quick ratio = Quick assets / Current liabilities

Quick assets = Current assets – Inventory

= 154,000 (calculated above) – 44,000

= $110,000

Current liabilities = $30,000

Now substitute the values in the above formula:

Quick ratio = 110,000 / 30,000

= 3.67 times

Therefore, quick ratio is 3.67 times

Calculation of Return on investment (ROI):

ROI = Net profit / total assets

Net profit = $40,000

Total assets = 400,000

Now substitute the values in the above formula:

ROI = 40,000 / 400,000

= 0.1 or 10%

Therefore, ROI is 10%

Calculation of Return on equity (ROE):

ROE = Net income / Stockholders' funds

Stockholders' funds = Common stock + retained earnings

= 200,000 + 119,000

= 319,000

Now substitute the values in the above formula:

ROE = 40,000 / 319,000

= 0.1254 or 12.54%

Therefore, ROE is 12.54%

Calculation of Debt to equity:

Debt to equity = Debt / Equity

Debt includes all liabilities

Debt = Accounts payable + Current notes payable + Mortgage payable + Bonds payable

= 23,000 + 7,000 + 8,000 + 43,000

= $81,000

Equity = $319,000 (computed above)

Now substitute the values in the above formula:

Debt to equity ratio = 81,000 / 319,000

= 0.2539

Therefore, debt to equity ratio is 0.2539 times.

ekkarill92 answered 1 year ago
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